South Asia - Punjab Province: Public Financial Management

Pakistan - Punjab Province: Public Financial Management and Accountability Assessment

Report Summary:

Facts:

- Punjab has to create 1 million new, sustainable jobs every year to reverse poverty by 2020.
- In the past decade, the average growth for Punjab was 4.4 percent a year.
- Pro-poor spending has increased from one half of government spending in 2001-02 to more than two third in 2006-07.
- The Government included a self-assessment of its financial management in its 2006-07 Budget White Paper.

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Summary Assessment

Punjab province has improved its Public Finance Management (PFM) performance since the last assessment carried out in 2005, notwithstanding the different approach taken by that study. The current report commends Punjab on the transparency and comprehensiveness of its budget, overall expenditure and revenue outturns, fiscal planning and orderliness of budget performance, and the maintenance of internal controls and tax collections. Performance was found to be lagging mostly in financial reporting processes at lower government levels and state-owned enterprises.

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Chapter 1: Introduction

This assessment, like the previous Provincial Financial Management and Accountability Assessment (PFMAA) of 2005, will form the basis for a renewed government PFM reform agenda for the coming years. It was featured as part of the Punjab Government’s White Paper which accompanied the budget for FY 2007-08. This chapter outlines the Public Expenditure and Financial Accountability (PEFA) framework and methodology used in the study, and acknowledges the contributions of the relevant stakeholders and task team.

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Chapter 2: Background Information on Punjab

Revenue surpluses generated from federal transfers, provincial receipts and taxes have led to year by year increases in the Punjab Government’s development budget; the multi-year budget process now includes some performance targets aimed at implementing the longer term development strategies envisioned in the Government’s 2020 Vision document. This chapter describes the economic situation and financial management challenges of the province in the context of the goals laid out in Vision 2020. It also outlines the legal and institutional PFM framework in the state.

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Chapter 3: Assessment of Public Financial Management (PFM) Performance

The study used the PEFA framework to cover 31 indicators for PFM functions, grading each indicator on a four level rating. Weak areas of performance included credibility of budget, maintenance of records, reporting of donor-funded project expenditures, accounting and financial reporting and, importantly, external scrutiny and audits. As at March 2006, there remained over 100,000 unresolved audit observations – these have a major impact on the proper use of resources and efficient service delivery because the fundamental requirements of transparency and accountability are not wholesomely applied.

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Chapter 4: Government Reform Process

The Punjab Government, through its Vision 2020, is engaging in wide-ranging reforms that together support the improvement of governance in the province: setting money aside for a Pensions Fund, structuring the Government’s loans to autonomous entities, increasing expenditures on infrastructure, simplifying taxes, improving documentation of public expenditures, and supporting local governance. Various multi-lateral agencies are supporting this process. Punjab has also committed to implementing the Project for Improvement in Financial Reporting and Auditing (PIFRA) across the entire province during 2007-08.

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