The recently released IMF Governance and Corruption Diagnostic Report (2025) has revealed the challenges related to governance and corruption in Pakistan and has also highlighted the weaknesses, gaps and weaknesses in the public financial management (PFM) system.
The strategic goal of strengthening our overall financial and economic management structure is independent of a robust and efficient PFM system. In its document, the IMF has recommended a review of supplementary grants from the last ten years by the Auditor General of Pakistan (AGP).
Persistent releases of supplementary appropriations during a financial year destroy the very sanctity of the budget passed by Parliament and not only weakens parliamentary oversight of public finances but also raises questions about our budgeting and implementation mechanisms.
There is a need to analyze the issue of top-up grants in the context of their impact on the wider PFM ecosystem, while highlighting the weaknesses identified by the IMF, including budgetary credibility issues and the transparency and accountability regime.
Supplementary appropriations are a critical but poorly understood component of Pakistan’s spending landscape, as the public is unaware of the significant intra-year adjustments that occur after the budget is passed.
The national budget is an instrument for managing the gap between revenue and expenditure through improved fiscal measures to generate revenue and setting prudent spending priorities. Lack of approved budgeted funds or the emergence of unforeseen needs during the financial year triggers the issuance of supplementary grants.
They give the government legal authority to meet inevitable overruns, fund new policies and regulate excess spending in accordance with constitutional requirements.
They do not balance the budget in the true sense. However, supplementary grants help maintain transparency by reflecting the true level of expenditure, allowing redistribution of savings or additional revenue to manage the overall fiscal position and ensuring the continuity of essential public services.
If used excessively, these grants can weaken budgetary discipline and undermine the credibility of the original budget and blur the fiscal position, especially when issued late in the fiscal year or without corresponding revenues.
Within the PFM system, the budget and supplementary appropriations are linked and form part of the constitutional and administrative framework that regulates how public funds are allocated, used and granted.
The primary allocation of public expenditure comes from the annual budget, which includes estimated income, approved expenditure, claims for grants and grants. Once passed by the National Assembly, the budget becomes the legal authority for the government to spend public funds within the approved limits.
However, experience has shown that expenditures over the course of a fiscal year may exceed originally budgeted amounts due to weak budget preparation and forecasting, demands, policy decisions, price escalations, implementation delays, and mandatory payments.
Experience also shows that most grants are approved in the fourth quarter of fiscal years, indicating systemic dependence on late-year budget adjustments, settlement of liabilities, and subsequent regulation. This pattern highlights inherent flaws in our budgeting and expenditure management practices that render budgetary control irrelevant.
Article 84 of the Constitution allows the federal government to authorize excess expenditure during the year, subject to later parliamentary scrutiny. In addition, section 25 of the PFM Act 2019 provides that “expenditure in excess of the budget amount, as well as expenditure that does not fall within the scope or intent of a grant, unless regulated by a supplementary grant, shall be treated as excess expenditure”.
Past practice has revealed that within this constitutional and administrative framework, successive governments have managed public expenditure by releasing supplementary appropriations, thereby diluting the sanctity of the budget. No doubt supplemental grants are issued to meet unforeseen needs, but they often undermine the integrity of the budget by allowing spending far beyond the originally authorized limits.
The frequent and discretionary use of supplementary appropriations weakens fiscal discipline, promotes overspending in the ministries and hides inefficiencies in planning and financial management.
The frequency with which supplementary grants are issued pushes public spending beyond the approved budget and reduces transparency and parliamentary oversight, creating gaps between political priorities and actual resource allocation.
Over time, this practice has eroded budget credibility, widened fiscal deficits, and reduced public confidence in the government’s ability to manage public finances prudently.
Supplemental grants compromise budget integrity and distort spending priorities when issued excessively or imprudently. They transform the budget from a binding financial plan into a flexible list, which ultimately reduces trust in public financial management.
Parliamentary oversight is a function enshrined in the constitution and includes, among other things, monitoring and control of public funds. The subsequent regulatory mechanism for supplementary appropriations raises critical questions about the accountability and transparency of public funds given the absence of proper legislative scrutiny in the National Assembly prior to their approval.
Proposals for supplementary grants should be debated in Parliament in the same way as the national budget, with appropriate scrutiny to ensure transparency and accountability.
Past practice shows that the approval process for supplementary appropriations has oscillated between bureaucratic (Finance Division) and political (Cabinet) channels, with the legislative role and oversight remaining diluted and ritualistic.
Financial propriety and prudence require that supplementary grants originating in a financial year be approved in the same year after due deliberation in the National Assembly, rather than through a fait accompli ex post approval process.
Even the Supreme Court has linked the issuance of supplementary grants to strict compliance with the procedures of Articles 83 and 84 of the Constitution, which means that the approval of the National Assembly is required before any supplementary expenditure is incurred. The pattern of executive prior approval of supplementary appropriations, either by the Finance Department or the Cabinet, followed by subsequent regularization, makes the National Assembly’s role largely limited to ratifying in-year executive decisions rather than shaping them. It appears that the system relies on “end-of-year, management-driven corrections” rather than a “robust advance budgeting and mid-year forecasting”.
It is expected that once the AGP publishes the audit report on supplementary grants issued over the last 10 years, the public will be able to assess whether budgetary discipline was maintained during this period or whether the supplementary grant mechanism became a parallel funding system. The AGP’s report must also highlight issues regarding the exact amount, accountability aspects, transparency and oversight of these grants.
To effectively deal with the issue of supplementary appropriations, it is necessary to streamline budgeting on a realistic basis and move away from ritualistic, incremental approaches. Budget needs should be linked to annual ministerial plans and targets should be consistent with the strategic objectives outlined in each entity’s medium-term budget framework.
One tool to deal with the excessive issuance of supplementary appropriations during the year is to establish strict criteria for the approval of additional funds together with robust monitoring during the year to detect overruns at an early stage. To address transparency and oversight issues, requests for additional funding should be submitted to the National Assembly promptly with clear reasons and the expected impact of additional funding.
The role and capacity of the Public Accounts Committee should be strengthened with a view to post-audit control of such funding. The government needs to adopt policies that limit large supplementary budgets at the end of the year and instead conduct mid-year reviews to adjust allocations rather than waiting until the end of the year.
The provision of additional allocations of funds must be linked to results and aligned with medium-term fiscal plans. Learning from past deviations can help strengthen overall financial integrity and reduce unnecessary reliance on supplemental financing.
Disclaimer: The views expressed in this piece are the author’s own and do not necessarily reflect Pakinomist.tv’s editorial policy.
The author is the former Auditor General of Pakistan.
Originally published in The News
