Govt implements mechanism for improving fiscal discipline

fiscal discipline

The government has announced the latest mechanism for annual and multi-annual fiscal commitment controls for all ministries, sectors and concerned departments, and subordinate offices, excluding the Defense Ministry, to boost the integrity of the budget and financial discipline.

“Expenditure arrears from the previous financial years are a major source of fiscal indiscipline and poor budget credibility in the government. These arrears build up because of the absence of an effective system of commitment control due to which government offices incur expenditure without matching allocations to discharge their liabilities,” the Ministry Finance said in a fresh notification.

Concluded after consultations with the Auditor General of Pakistan as compulsory under the Public Financial Management Act 2019 pushed by the international lending agencies, the finance ministry stated the informed guidelines were intended “to minimize the build-up of expenditure arrears in the government and help improve fiscal discipline and budget credibility.”

Read more: Pakistan heading towards record $20 billion deficit in current fiscal

Moreover, these instructions would be valid to all ministries, divisions, executive departments, public units, and offices set up and controlled by the federal government getting grant-in-aid or public money from the federal government.

However, the Ministry of Defense would be exempted due to its unusual arran­gement under which defense divisions are a one-line transaction. It may create comparable arrangements for defense services, if compulsory, with the concurrence of the finance division.

According to the guidelines, annual commitments shall be registered for both persistent and development budgets for procurement of services, goods, and carrying out civil works.

In case of properly authorized obligation, a contract, or purchase order, these commitments shall also be recorded, for making a future payment against a budget allocation with a value of rupees one million or more.

the accounting offices shall use the Financial Accounting and Budgeting System (FASS) and RAAST Instant Payment System for commitment control in conformity with the directions issued by the Controller General of Accounts (CGA) and State Bank of Pakistan (SBP).

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