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July 11, 2017

Financial discipline at bay


July 11, 2017

In the last week of June this year, the Punjab government made an amendment in Punjab Financial Rules (PFR). The purpose was to make payable the cheques of the previous financial year in the new financial year (until July 7). This was one-time relaxation in the rules, explained the notification.

The amendment carried out by the PML-N government has gone unnoticed by the media. Its significance can be judged from the fact Shahid Kardar had resigned from the position of Governor State Bank of Pakistan due to dispute on this with the PPP government. He had refused to account in the collection of June for the cheques of June paid on 1st July. It was contrary to the financial accounting.

Such fundamental change raises important questions such as: 1) can a provincial government amend the financial rules? 2) What were the imperatives warranting such amendment? 3) What could be its implication for financial discipline and lastly, 4) why only the Punjab government resorted to this amendment?

To begin with, it is clarified, at the outset, that financial year in Pakistan starts form 1st July and ends on 30th June next year. Assemblies accord approval to the receipts and expenditures for the next financial year in the financial acts at federal and provincial level. The age expires with the end of financial year. It has never happened that the tenure of the financial year has been altered. Even, if there is pressing needs such as natural calamity or war even then only the Parliament can relax the financial rules.

It is disturbing to note that even the opposition did not raise this important issue by way of submitting the motion in the Assembly. “Either they have limited capacity or lack of seriousness to focus on core issues for ensuring the financial integrity”, remarked a prominent economist. Is it not a blunt way of fudging revenue figures, reacted a former Auditors General of Pakistan”.

It is important to know the reasons behind such relaxation. As per practices and rules, 40% of the expenditure budget is spent in the first six months and balance in the second half of the year. Much of expenditure is exhausted in June resulting in rush on the office of accountant general. There are complaints of extortion by treasures offices before making payment especially during the last week of June. That being besides the point, the Punjab government has developed a strange practice of deputing Secretaries of different departments to supervise field officers. Accordingly, it placed the Punjab AG Office too under the Secretaries’ supervision. On a question whether such a step ensured the transparency in making payment, one of the main contractors pointed out, “yes it has but increased the rate of speed money”. Secondly, many departments issued cheques in advance against the funds, which are to be released from the budget of next current year. This way the government completed the phase of the projects earmarked from 2016-17. This suited Federal Board of Revenue, which now depends on taxation at source, and bridged to some extent its gap from meeting thrice-revised targets.

One of the renowned chartered accountants stated that such steps would rupture the basic accounting principles and consequently shake the discipline in monitory pillar of the Estate. This and other such like unwarranted steps by Govt. of Punjab and fiscal deficit Federal Govt facing may take the heal out of whatever the economic stability the Govt. has achieved.

Another political economist remarked that the government “optics” are of no use in long run other than alluring the ignorant voters. The government, however, should realise that financial rules are meant to regulate the spending of funds that too in the field or sector for which these are allocated by the Assembly.

In business circles it is generally questioned as to why the concerned bureaucratic machinery did not object to such relaxation but then there are feelings that these people are concerned only about their perks and privileges; come what may. On question from the concerned quarters as to who initiated this proposal, no response was the response.

One member of the academia familiar with financial management stated that media too has a share in deteriorating standards, which even did not raise this issue in its chatterbox discussion. These are the issues that serious media should accord priority but it opts to look the other way lest government stops the advertisements. Had the media raised such issue the judiciary might have taken suo moto notice, remarked a prominent corporate lawyer.

Funds are allocated to different projects and if any portion of these is spent on project of previous year, how the current projects will be completed/ questioned by some engineers doing the 3rd party evaluation. However, they forget that the government got supplementary grant for billions of rupees in financial year 2016-17 and who will stop them doing the same in the current year.

The question why only government of Punjab has to amend the Financial Rules and not the other provinces is worth pondering which has far reaching ramifications for the federation. There is no denying the fact that Punjab and Federal governments are one and the same thing but such proximity should bring in more responsibility especially in financial matters.

Have this been done by Sindh, there would have been too much criticism in the media as well as by the Federal Govt. One of the Planners of Punjab government justified as the Govt. fully utilised the funds for the welfare of the people even out of funds allocated for the next year. However, but such polemics don’t rub well with the financial discipline. Opponents of such changes feel that showing least regards for Rules and Regulation might plunge the country in to deeper financial crises such as what has been happened in Greece and Brazil.

The writer is a fiscal analyst and former DG in FBR

Email; Shafqat [email protected]

Twitter: @Chafqat

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