The IMF’s Governance and Corruption Diagnostic Report 2025 has placed a renewed spotlight on Pakistan’s fiscal governance, drawing attention to persistent weaknesses in public sector financial management and the country’s growing dependence on supplementary grants. The report outlines structural gaps in budgeting, transparency, and accountability, while recommending a comprehensive audit of supplementary grants issued over the past decade by the Auditor General of Pakistan. This recommendation has reignited debate over how public money is planned, authorised, and spent.
At the core of the IMF’s findings is the idea that strong financial and economic governance cannot exist without a credible and disciplined public financial management system. In Pakistan’s case, repeated releases of supplementary grants during the fiscal year have weakened the authority of the national budget approved by parliament. These in-year adjustments often dilute parliamentary oversight and raise questions about the realism of budget preparation and execution mechanisms.
Supplementary grants remain a critical yet poorly understood feature of Pakistan’s expenditure framework. Once the national budget is passed, significant adjustments are made during the year, largely outside public visibility. The budget is meant to serve as a tool for managing the gap between income and expenditure through improved taxation and disciplined spending priorities. When approved allocations fall short or unforeseen requirements emerge, supplementary grants are issued to legally authorise additional spending.
In principle, these grants allow the government to respond to emergencies, finance new policy decisions, and regularise unavoidable overruns while remaining within constitutional boundaries. They also help reflect the true level of spending and ensure continuity of essential public services. However, they do not correct fiscal imbalances on their own, and when used excessively or late in the year, they can blur the government’s actual fiscal position.
Within the public financial management framework, the annual budget and supplementary grants are closely linked. The budget provides primary legal authority for public spending once approved by the National Assembly. Yet, recurring experience shows that actual expenditure frequently exceeds original allocations due to weak forecasting, policy shifts, price escalation, implementation delays, and mandatory payments. A notable pattern is that most supplementary grants are authorised in the final quarter of the fiscal year, reflecting systemic reliance on end-of-year corrections rather than proactive financial planning.
The Constitution allows excess expenditure under Article 84, subject to later parliamentary scrutiny, while the Public Financial Management Act 2019 classifies unapproved spending as excess expenditure unless regularised through supplementary grants. Over time, successive governments have relied heavily on this mechanism, effectively managing public finances through post-facto approvals rather than disciplined budgeting. This approach has weakened fiscal discipline, encouraged overspending by ministries, and concealed inefficiencies in planning and execution.
Frequent use of supplementary grants has also reduced transparency and diluted the role of parliament. Instead of acting as a binding financial plan, the budget risks becoming a flexible list of intentions. The ex-post regularisation process raises concerns about accountability, as legislative scrutiny often occurs after spending decisions are already implemented.
Judicial interpretations have reinforced that supplementary spending must comply strictly with constitutional procedures, requiring National Assembly approval before expenditure is incurred. In practice, executive pre-approval by the finance division or cabinet followed by parliamentary ratification has limited the legislature’s role to endorsing decisions already taken. This reflects a system dependent on end-of-year executive adjustments rather than credible ex-ante budgeting and mid-year forecasting.
The forthcoming audit by the Auditor General of Pakistan is expected to clarify whether supplementary grants have served as a legitimate fiscal tool or evolved into a parallel funding mechanism. Its findings on volume, transparency, and accountability could shape future reforms.
Addressing the issue requires a shift toward realistic budgeting linked to ministerial plans and medium-term frameworks. Clear criteria for approving supplementary funds, stronger in-year monitoring, timely parliamentary debate, and enhanced oversight by the Public Accounts Committee are essential steps. Aligning additional allocations with performance and medium-term fiscal plans could help restore budget credibility and reduce dependence on supplementary funding.
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