Summary Assessment
This assessment of Public Financial Management (PFM) in Balochistan, the first study of its kind in the province, underscores the gains made by the Government’s PFM reforms but also concludes that implementation is fairly slow. It recommends an annual self-assessment using the Public Expenditure and Financial Accountability (PEFA) framework and methodology used in this report, as a monitoring tool. Other specific recommended actions and institutional measures required to reverse the weak PFM performance of the province are highlighted in a summary diagnostic accompanying the study.
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Chapter 1: Introduction
The PEFA PFM assessment framework is based on six pillars of performance: credibility of budget; transparency and comprehensiveness; policy-based budgeting; predictability and control in budget execution; accounting, recording and reporting; external scrutiny and audit; and donor practices. The 31 PFM indicators (each rated separately) fall into these categories: PFM system out-turns; cross-cutting features of the PFM system; budget cycle; and donor practices. The assessment focuses on the operational performance of the PFM system, not on the inputs that enable it to reach a certain level of performance.
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Chapter 2: Background Information on Balochistan
Balochistan is the largest province in Pakistan with 44 percent of the country’s land area but only 5 percent of the population. The province is comparatively backward and economic development is needed to deal with significant structural problems, both political and socio-economic. The revenue and expenditure budgets of Balochistan are characterized by sporadic adjustments on a year to year basis. The chapter goes into the reasons for this and also provides a detailed view of the legal and institutional PFM framework in the province.
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Chapter 3: Assessment of Public Financial Management (PFM) Performance
The results show the integrated nature of PFM deficiencies in Balochistan and highlight the need for budget development processes; commitment and fiscal risk-recording processes; transparent and effective tax assessment and revenue collection; better internal controls over payrolls and expenditures; procurement reforms; improved accounting and auditing; and improved reporting of donor-funded investment projects. Focused pressure from within the system is required to improve performance in the area of legislative scrutiny. Timely implementation and enforcement of certain reforms by way of institutionalization is also necessary.
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Chapter 4: Government Reform Process
The Balochistan Government is determined to pursue a robust economic and human development path but a large stock of high-interest debt, coupled with an overall constrained fiscal space, have limited the scope for financing development in Balochistan. The difficult physical terrain and land mass also impair the effective, timely, and orderly roll-out of PFM reform implementation strategies across the entire province. This chapter highlights the government’s reform process, as well as achievements, in the context of these challenges.
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