The federal government has issued an updated version of the Public Finance Management (PFM) Act, 2019, incorporating amendments up to June 30, 2024. The revised framework is designed to enhance fiscal discipline, strengthen accountability, and ensure greater transparency in the use of public funds, aligning Pakistan’s financial governance with international best practices.
Originally passed in 2019, the PFM Act was a cornerstone of fiscal reforms introduced to address weaknesses in budgetary management, improve debt sustainability, and increase oversight of public spending. These reforms were largely pushed forward under commitments made to international lenders, who have long emphasized the importance of transparent fiscal frameworks in building economic resilience.
The new amendments significantly expand the scope of fiscal responsibility by ensuring that all government entities, including autonomous organizations and state-owned enterprises, are brought under stricter accountability rules. The legislation also provides greater clarity on the roles and responsibilities of the Ministry of Finance, line ministries, and public entities in managing fiscal resources.
As mandated by the Act, the federal government must present to the National Assembly an Annual Budget Statement in accordance with Articles 80 and 81 of the Constitution. This includes detailed statements of purpose and estimates for each demand for grant, alongside projections of contingent liabilities and assessments of fiscal risks. Each budget cycle will now require clear reporting of estimates, revised figures, and actual expenditures to ensure transparency in resource allocation and spending.
A notable provision of the amendments is the compulsory disclosure of all sovereign guarantees and contingent liabilities. This move is expected to boost the confidence of international lenders and investors by providing a clearer picture of Pakistan’s fiscal commitments and financial risks.
The Finance Division has been granted wider authority under the updated law, including regulation of budgetary processes, management of government cash flows, issuance of guarantees, and borrowing activities. The amendments introduce stricter reporting and disclosure requirements, obligating the government to set medium-term fiscal objectives and publish comprehensive debt sustainability analyses on a regular basis.
For special funds established under federal law or approved by the government, the Finance Division will now be responsible for issuing rules and directives governing their use. Each fund must identify its purpose, designate a principal accounting officer, and ensure that cash balances form part of the Public Account of the Federation. These funds, like other public expenditures, will be subject to audit by the Auditor General of Pakistan.
Oversight mechanisms have also been reinforced. Public entities and autonomous bodies are now required to submit timely financial statements and are barred from unauthorized borrowing. The Auditor General of Pakistan has been given enhanced audit powers, while the Public Accounts Committee (PAC) has been strengthened to provide more robust parliamentary scrutiny of fiscal matters.
The government believes the revised PFM Act will help align Pakistan’s fiscal framework with global standards, improve investor confidence, and reduce inefficiencies in public spending. At the same time, the reforms are expected to foster stronger coordination between federal and provincial governments in achieving fiscal responsibility.
The updated law comes at a critical juncture, as Pakistan continues to face economic challenges and remains under close observation from international financial institutions. By tightening fiscal controls and expanding transparency, the government aims to demonstrate its commitment to prudent financial management and sustainable economic growth.