RAWALPINDI, July 25: The International Monetary Fund (IMF) has said that data on government investment in wholly-owned and joint venture enterprises and equity investments is collected, but is not currently up-to-date.

In its report on ‘Observance of Standards and Codes’, the IMF stated that though privatisation of the Karachi Electricity Supply Company (KESC) is complete and a process of commercialisation of the Water and Power Development Authority (Wapda) is underway, the overall drain on the budget from Wapda, and other state enterprises such as Pakistan Railways and Pakistan International Airlines remains substantial.

The discrepancy between deficit recorded in the fiscal accounts and that estimated from financing records is currently being addressed by the authorities, the report added.

The magnitude of the discrepancy, at around 1.2 per cent of GDP in 2004-05, has been of concern for some time. A rigorous mapping and analysis of the reconciliation process should resolve this issue. Splitting of responsibilities for producing the fiscal report between AGPR and the Budget Wing of the ministry of finance, however, has meant that no organisational unit has clear responsibility for eliminating the statistical discrepancy.

These problems are likely to be overcome once the interface between the finance ministry, State Bank of Pakistan, economic affairs and statistics department (EAD) and AGPR systems is completed.

Resolving this discrepancy is the key to ensuring accountability under the FRDL, which depends on assurance of reliability of key fiscal indicators.

The IMF report stated that three main areas of weakness appear to impede the pace and impact of the public finance management (PFM) reforms. First, and as acknowledged by the authorities, internal controls and management capacity within line ministries is weak.

Achieving a satisfactory standard in this area is a recommended good practice of the fiscal transparency code. It is also a pre-requisite to a satisfactory level of performance in budget preparation, execution, and external audit.

Second, the inherited systems of planning, budgeting, and reporting, which are little changed, need to be progressively modified in line with the requirements of the medium-term budgeting framework (MTBF), the Fiscal Responsibility and Debt Limitation Law (FRDL), and international standards of accounting and fiscal reporting.

Third, and related to the previous point, cooperation among the main stakeholders in implementing PFM reforms, while improving, has been limited so far. Improvement in this last area will have the most immediate impact, and will be an essential foundation for sustained reform, the report stated.