The International Monetary Fund (IMF) has urged Pakistan to end the preferential treatment given to projects initiated by parliamentarians, recommending that these initiatives be fully incorporated into the Public Sector Development Programme (PSDP) and subjected to standard approval procedures.

According to the IMF’s latest Governance and Corruption Diagnosis Assessment, current parliamentarian-led schemes, often overseen by the Steering Committee on SDGs Achievement Programme chaired by Deputy Prime Minister Ishaq Dar, bypass the rigorous scrutiny applied to PSDP projects. This, the report warns, increases the risk of inefficiency and waste.

Last fiscal year, Rs. 61 billion was spent on these small-scale community welfare projects, with Rs. 70 billion earmarked for the current year. Critics argue that funneling funds outside the PSDP framework diverts money from higher-priority development projects, potentially reducing overall impact.

Calls for Fiscal Discipline and Parliamentary Oversight

The IMF emphasized that mid-year budget revisions should not occur without prior parliamentary approval, underscoring the importance of respecting the legislature’s authority. The report also criticized the Finance Ministry for sidestepping both the federal cabinet and Parliament during pre-budget discussions, including delays in finalizing the Budget Strategy Paper.

To improve fiscal planning, the IMF recommended releasing the strategy paper six months before the budget presentation in June, complete with macroeconomic and fiscal indicators, and reviewing the accuracy of past budget forecasts.

Limiting New PSDP Projects and Supplementary Grants

Another key recommendation focuses on resource allocation: the IMF advised restricting new PSDP projects to 10% of the total budget, urging the Ministry of Planning to prioritize high-impact initiatives and avoid politically motivated spending outside federal oversight.

The IMF also reiterated its long-standing call to end reliance on supplementary grants without prior parliamentary consent. Currently, the government frequently approves mid-year allocations retrospectively—for instance, Rs. 5.8 billion for flood relief and Rs. 30 billion for foreign remittance subsidies, both approved after intervention from the Prime Minister’s Office. This week alone, the Economic Coordination Committee sanctioned Rs. 3.5 billion in QR code payment subsidies and Rs. 250 million for the National Security Division’s Strategic Policy Planning Cell.

Instead, the IMF suggested establishing a contingency fund to manage unexpected expenditures, such as natural disasters, reducing the need for ad hoc budget adjustments.

Boosting Transparency in Procurement

The IMF also called for reforms to the Public Procurement Regulatory Authority (PPRA) framework. The report recommended eliminating preferential treatment for state-owned entities and charitable organizations in public procurement, aiming to increase transparency, efficiency, and accountability in how public funds are spent.

By addressing these issues, the IMF argues, Pakistan could improve governance, reduce fiscal inefficiencies, and ensure development resources are used where they are needed most.