VERY few people realise that the budget for the next financial year (2020-21) will, for the first time since the adoption of the 1973 Constitution, be presented under a new law called the Public Finance Management Act (PFMA), 2019, instead of the stopgap arrangement of following the rules made by the president of Pakistan. Article 79 of the Constitution required parliament to frame a law to regulate the public accounts of the federation. But 47 years went by without parliament framing such a law, and the presidential rules, by default, filled the vacuum as provided for in the Constitution.
Ironically, very few legislators and even fewer mediapersons or political parties seem to be aware of the passage of such a law because the PFMA was quietly slipped into the Finance Bill, 2019, and while legislators were busy debating the budget, the law was passed along with the Finance Act, 2019. Despite the irony, the cause of parliamentary scrutiny of public finances inched forward with the passage of the law. The struggle for an effective parliamentary scrutiny of the budget framed by the executive is far from over but one must acknowledge a step forward.
The PFMA has many useful aspects only if parliamentarians are able to make proper use of them. For example, the budget strategy paper which until recently was a jealously guarded document known only to a chosen few in the Finance Division and the federal cabinet, is now required to be not only discussed with the parliamentary committees on finance in the Senate and the National Assembly but also to be published on the Finance Division’s website for the benefit of the general public as well.
Ironically, very few legislators seem to be aware of the passage of the PFMA.
This document is supposed to contain medium-term (three years) forecasts on a rolling basis. The first year of the forecasts will form the basis of budget 2020-21, while the other two years are provided for the improved predictability of resources. This paper, required to be prepared by mid-March every year, is an important tool for parliamentary oversight of the executive’s financial master plans. It is easier to read through the document as it is only 20 or so pages long.
By mid-March this year, the Finance Division had discussed the paper with at least the National Assembly Standing Committee on Finance and a copy was uploaded on the division’s website. Sadly, key contents of the paper may have already become outdated because of the fast-changing realities of the Covid-19 pandemic. Ideally, the government should have updated the paper and discussed with the parliamentary committees afresh but one must recognise the nature of the moving targets of the economy which might have made this exercise difficult, if not impossible.
Another interesting feature of the PFMA covered in Section 34 of the Act, makes it compulsory for the federal government to place the mid-year review reportbefore the National Assembly by Feb 28 each year. This is a significant breakthrough as the legislature never knew in the past how the budget was being executed and what the status of revenues and expenditures was until the next year’s budget was presented. The Finance Division submitted the current financial year’s mid-year report to the speaker of the National Assembly on Feb 21, a week before the deadline set in the law. It is not clear whether the parliamentarians discussed the report in their plenary or during the meetings of the Standing Committee on Finance. It would be unfortunate if parliament just received the report and made it a part of the record without scrutinising it or calling the Finance Division’s senior officials for briefing and answering questions.
It would be far more useful for the National Assembly to receive and critically examine the year-end government performance monitoring report which is promised under Section 35 of the Act. This report will, however, not be available till end of 2022 when the first performance monitoring report for the financial year 2021-22 will be presented after which the report will be presented every year within six months of close of the financial year. This and other reports to be submitted by the government to parliament will be useful only if parliament and its committees are willing and equipped to undertake their much-needed oversight function in an effective manner.
Traditionally, the committees have not been very active in the context of oversight of the executive. As a pilot, the finance committee should be provided the necessary resources to hold the government accountable for its financial policies and discipline. The committee should, in the meantime, network with a number of independent economists and think tanks and hold public hearings on the mid-year budget development report and the year-end government performance report to enable itself to communicate parliament’s feedback to the government.
It is ironic that while the executive is taking initial steps to present its performance before parliament, the latter itself is not moving in that direction. A key reform that is urgently needed is that the Finance Bill, like all other bills laid before the National Assembly, should be referred to the finance committee for detailed examination before it is debated and passed in the plenary. The National Assembly should also extend its period of budget scrutiny and debate from the present average of 14 days to around 45 days so that the demands for grants of various ministries and divisions can be forwarded to the concerned committees for detailed scrutiny.
At some point, Article 84, which apparently allows the executive to alter the budget approved by the National Assembly in any way it deems fit during the year without prior approval by the Assembly, should be amended. The executive’s unbridled powers to alter the approved budget runs counter to the basic principles of democracy and the sooner we get rid of this embarrassing provision in the Constitution, the better.
The writer is president of the Pakistan Institute of Legislative Development And Transparency.
Published in Dawn, June 7th, 2020