INP-WealthPk
Govt Issues New Guidelines to Improve Fiscal Discipline
April 04, 2022
By Abdul Wajid Khan ISLAMABAD, April 04 (INP-WealthPK): The government has issued fresh guidelines related to annual and multi-annual commitment control systems for all ministries, divisions, their attached departments and subordinate offices to help improve fiscal discipline and control expenditures. Commitment means an obligation to make a future payment, the funds for which are reserved against the allocated budget for an entity, while multi-year commitment means an obligation to make a future payment, the funds for which are reserved against the allocated budget for that financial year and forward estimates for the medium-term. According to a notification of the ministry of finance, a copy of which was available with WealthPK, the Finance Division has approved the guidelines in consultation with the Auditor General of Pakistan. Accumulation of expenditure arrears over the previous financial years have been a major source of fiscal indiscipline. These arrears tend to build up because of absence of an effective commitment control system as government offices incur expenditures without matching allocations to discharge their liabilities. Hence, the guidelines aim to minimise the build-up of expenditure arrears and help improve the government’s fiscal discipline and budget credibility. The Finance Division has approved and issued these guidelines in the exercise of the powers conferred by section 26 of the Public Financial Management Act, 2019. Public entities and offices established and controlled by the federal government will incorporate these guidelines in their accounting and budgeting frameworks. However, the ministry of defence may issue separate commitment control guidelines for defence services if required, with the concurrence of the Finance Division. Under these guidelines, annual commitment will be recorded for both recurrent and development budgets to procure goods, services, and carry out civil works. These commitments will be recorded under a properly authorised obligation, a contract or purchase order, to make a future payment against a budget allocation with a value of one million rupees or more. These commitments will be applicable when the amount of transaction is known, the supplier has been nominated, a legal contract or purchase order has been entered with the supplier, and the relevant officer has authorised the contract for procurement of goods, services or for civil works in accordance with the financial management and powers of Principal Accounting Officers Regulations, 2021. The officer sanctioning or authorising a contract for procurement of goods, works, and services above the threshold of one million rupees shall be personally responsible for communicating the commitment to the respective accounting office within one week of approving the contract. The accounting office concerned shall be responsible for recording the commitment in accordance with the provisions of the Accounting Policies and Procedures Manual (APPM) within one week of receiving the request from the sanctioning officer. The Accountant General of Pakistan Revenue (AGPR) will provide to the Finance Division, on monthly basis, a summary statement showing consolidated commitments and monthly cash requirements of all divisions, departments and offices. This will be in addition to financial reports required to be submitted by AGPR to the expenditure wing of the Finance Division. Financial Accounting and Budgeting System (FABS) and RAAST Instant Payment System shall be used by the accounting offices or commitment controls in accordance with the instructions issued by the Controller General of Accounts (CGA) and State Bank of Pakistan (SBP). Annual commitments shall be adjusted when the payment is made and all annual commitments shall lapse along with the budgetary allocation at the end of a financial year. While preparing the revised estimate for a financial year, the divisions, departments and offices shall estimate the commitments likely to lapse at the end of a financial year and add the amount required to meet such commitments in the budget estimates for the next financial year. Multi-year commitments in respect of goods, services and civil works shall be recorded through the budget-making process. Under the process, Principal Accounting Officer (PAO) shall include multi-year commitments of cost centres under his/her control in the medium-term budget estimates within the approved indicative budget ceilings. The commitments for the next financial year shall also include the annual commitments carried forward from the current financial year. The Finance Division’s expenditure wing shall review the medium-term commitments provided by each PAO and shall forward the same to the Finance Division’s budget wing for incorporation in the budget documents submitted for approval by the cabinet and the parliament. At the start of each quarter of a financial year, PAO shall provide a quarterly payment schedule to the expenditure wing to discharge commitments. Accordingly, the budget wing shall decide quarterly fund release strategy for the divisions, departments and offices. A proposal for an increase in quarterly limits, if necessitated by a contractual obligation of the divisions, departments and offices, will be considered by the budget wing on a case-to-case basis. Such proposals must be submitted to the Finance Division at least one month before the date for discharge of payments arising from commitments. Multi-year commitments shall be adjusted and carried forward to the subsequent financial year while remaining within the indicative budget ceiling for the respective year.
