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Pakistan officially the Islamic Republic of Pakistan, is a sovereign country in South Asia. With a population exceeding 180 million people, it is the sixth most populous country and with an area covering 796,095 km2 (307,374 sq mi), it is the 36th largest country in the world in terms of area. Located at the crossroads of the strategically important regions of South Asia, Central Asia and Western Asia, Pakistan has a 1,046-kilometre (650 mi) coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by India to the east, Afghanistan to the west and north, Iran to the southwest and China in the far northeast. It is separated from Tajikistan by Afghanistan’s narrow Wakhan Corridor in the north, and also shares a marine border with Oman.

An Overview

Pakistan
Capital Islamabad
Largest City Karachi
Official language English
Regional Language Punjabi, Sindhi, Pushto, Balochi, Saraiki, Hindko, and Brahui
Government Federal Parliamentary Republic
Area 796095 Sq Km
Population 182,490,721
Total GDP $236.518billion
Per Capita $1295
President Mamnoon Husain
Prime Minister Nawaz Sharif
Chief Justice Tassaduq Husain Jillani
Chairman Senate Nayyer Bukhari
Speaker National Assembly Ayyaz Sadiq
Legislature Majlis-e-Shura
Upper House Senate
Lower House National Assembly
Currency Pakistani Rupee (PKR)

Geography

The geography of Pakistan is a profound blend of landscapes varying from plains to deserts, forests, hills, and plateaus ranging from the coastal areas of the Arabian Sea in the south to the mountains of the Karakoram Range in the north. Pakistan geologically overlaps both with the Indian and the Eurasian tectonic plates where its Sindh and Punjab provinces lie on the north-western corner of the Indian plate while Balochistan and most of the Khyber-Pakhtunkhwa lie within the Eurasian plate which mainly comprises the Iranian plateau, some parts of the Middle East and Central Asia. The Northern Areas and Azad Kashmir lie mainly in Central Asia along the edge of the Indian plate and hence are prone to violent earthquakes where the two tectonic plates collide.

Pakistan is bordered by Afghanistan to the north-west and Iran to the west while the People’s Republic of China borders the country in the north and India to the east. The nation is geopolitically placed within some of the most controversial regional boundaries which share disputes and have many-a-times escalated military tensions between the nations, e.g., that of Kashmir with India and the Durand Line with Afghanistan. Its western borders include the Khyber Pass and Bolan Pass that have served as traditional migration routes between Central Eurasia and South Asia.

Economic Strength

The economy of Pakistan is the 27th largest in the world in terms of purchasing power parity (PPP), and 44th largest in terms of nominal GDP. However as Pakistan has a population of over 183 million (the world’s 6th-largest), GDP per capita is low: the nation’s 2012 PPP-adjusted GDP per capita of approximatelyUS$2900 ranked 135th, 141st, or 147th in the world according to the International Monetary Fund, World Bank, and US Central Intelligence Agency respectively.

Pakistan has a semi-industrialized economy, which mainly encompasses textiles, chemicals, food processing, agriculture and other industries. Growth poles of Pakistan’s economy are situated along the Indus River; the diversified economies of Karachi and major urban centers in the Punjab, coexisting with lesser developed areas in other parts of the country. The economy has suffered in the past from decades of internal political disputes, a fast growing population, mixed levels of foreign investment. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit – driven by a widening trade gap as import growth outstrips export expansion – could draw down reserves and dampen GDP growth in the medium term.

Public Financial Management System – An Overview

Public finance is the study of the role of the government in the economy. It is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

The purview of public finance is considered to be threefold: governmental effects on

  • Efficient allocation of resources,
  • Distribution of income, and
  • Macroeconomic stabilization.

Public Financial Management (PFM) is about ensuring that public money is used well, and is made to stretch as far as possible. It provides leaders and managers with information to make decisions and to know if they are using resources effectively. Managing finances in the public sector is about much more than accountancy – it is an integral part of bringing services to people.

Public Finance Management (PFM) basically deals with all aspects of resource mobilization and expenditure management in government. Just as managing finances is a critical function of management in any organization, similarly public finance management is an essential part of the governance process. Public finance management includes resource mobilization, prioritization of programmes, the budgetary process, efficient management of resources and exercising controls.

Collection of sufficient resources from the economy in an appropriate manner along with allocating and use of these resources efficiently and effectively constitute good financial management. Resource generation, resource allocation and expenditure management (resource utilization) are the essential components of a public financial management system.

Public finance is closely connected to issues of income distribution and social equity. Governments can reallocate income through transfer payments or by designing tax systems that treat high-income and low-income households differently.

Pakistan – Governance and Budgeting System

Geography and Administrative Divisions

Pakistan, officially called the Islamic Republic of Pakistan, is located in South Asia. It is bordered by Afghanistan, Iran, India and China. Its total land area is 796,095 sq km. The country is known as having the sixth largest population in the world with 193 million people.

Pakistan has the 27th largest economy in the world in terms of purchasing power parity (PPP), and 44th largest in terms of nominal GDP with per capita GDP $2900 and agriculture, industry and services are key sectors contributing with the share of 20.1%, 25.5% and 54.4% respectively.

Government of Pakistan consists of two branches, i.e. executive branch and legislative branch. The state is governed by two executives: Head of State (the President) and  Head of Government (the Prime Minister). President is elected by secret ballot through an Electoral Process by the members of the Senate, National Assembly, and provincial assemblies for a five-years term, while Prime Minister is elected by the votes of the majority of the members of the National Assembly.

Pakistan has bicameral parliament consisting of the Senate (104 seats; 92 senators elected by the members of provincial assemblies; whereas 8 senators from FATA and 4 senators from Federal Capital elected in such manner as the President may, by order, prescribe to serve six-years term; one half are elected every three years) and the National Assembly (342 seats; 272 members elected by popular vote; 60 seats reserved for women; 10 seats reserved for non-Muslims; members serve five-years term). There are 250 registered political parties all across Pakistan.

Provinces and States

As per article 1 of Constitution of Islamic Republic of Pakistan, territory of Pakistan may consist of four provinces, one federal capital territory , FATA and other states and territories, included by accession or otherwise.  The four provinces include Punjab, Sindh, Khyber Pakhtunkhwa (KPK) and Baluchistan. And two autonomous territories / states are (i.e. Azad Jammu and Kashmir and Gilgit Baltistan).

Within provinces, there are ‘divisions’ with hundreds of districts (zillahs), sub-districts (tehsils / taluqas) and several thousand union councils. Each of the Provinces consists of several ‘departments’ headed by ministers chosen from the elected representatives of the assembly and a secretary (from the public service). The head of the province is the Governor, who is nominated by the President of Pakistan, while the head of the Government of each province is the Chief Minister who is elected by the respective Provincial Assembly.

The Government of the Punjab is based in Lahore (the capital of the Province). Punjab is Pakistan’s largest province in terms of population and second largest in terms of area (205,344 sq km).The Provincial Assembly of the Punjab has a total of 371 seats, with 66 seats reserved for women and eight reserved for non-Muslims. Punjab has 38 provincial departments headed by provincial sectaries. The Provincial Secretaries are headed by Chief Secretary who manages to report to chief minister of the Province.

Sindh with its 42.4 million populations stands second largest and with an area of 140914 sq km stands third largest province of Pakistan. Government of Sindh is based in Karachi (provincial capital). The provincial assembly consists of 168 members who are elected through direct vote and represent their own constituencies. 30 seats are reserved for women and 8 for non-Muslim minority. Sind has 27 districts. There are 46 provincial departments in Sindh government.

Balochistan has an area of 347,190 sq km comprising 43% of Pakistan’s landmass. The population is 7,914,000 (4.5% of country’s population) with density of 23/ sq. km. Government of Balochistan is based in Quetta. Government of Balochistan consists of 26 Departments and some allied offices. These Departments are headed by Provincial Secretaries.

Khyber Pakhtunkhwa is located in the north-west of the country and has an area of 74,521 km². The provincial capital city is Peshawar. The Province has a Provincial Assembly with 124 elected members, constituent of 99 Regular seats, 22 seats reserved for women and 3 seats for non-Muslims. Total number of provincial departments is 30.

Like provinces, Gilgit-Baltistan has a governor and a chief minister. The administrative and legislative structure of the other autonomous territory (Azad Jammu & Kashmir – AJK) and FATA (Federally Administered Tribal Areas) is quite different than of the provinces. For instance AJK has a president and a prime minister as head of state and head of government respectively. But FATA comprises various agencies governed by political agents (officers from the civil services appointed by the government for administration).

Resource Distribution Mechanism

The resource allocation and budgetary system in Pakistan is somewhat of critical in nature. Since the country is a federation of four provinces, revenues are collected centrally (mainly by / through Federal Board of Revenue) and then distributed between the federal government and the federating units. This distribution takes place in accordance with a resource distribution mechanism called National Finance Commission (NFC) Award, which is applicable to resource transfers to federal government and the four provinces. Resource transfers to Gilgit-Baltistan, AJK and FATA are not governed by NFC Award. NFC is constituted by the President of Pakistan after every five years.

Transfers under the NFC Award constitute the largest resource item in provincial receipts. Provinces have the authority and power to raise taxes (other than those collected by the Federal government and which are covered under the NFC Award). Examples of provincial taxes include Excise Duty, Property Taxes, Sales Tax on Services, etc. In relation to district / local finances, the Provinces have their own resource distribution mechanism (called Provincial Finance Commission Award) for resource transfer to districts.

Financial Management and Accountability

Public Finance Management and Accountability in Pakistan

Public finance management and accountability in Pakistan consists of two tiers: (a) Planning & finance; and (b) accounts & audit. Ministry of Finance, Planning Commission, Controller General of Accounts, Accountant General Pakistan Revenues and Auditor-General of Pakistan are considered as supreme financial management and accountability institutions in Pakistan.

Planning and Budgeting

Planning & budgeting functions are performed independently at federal and provincial levels. Ministry of Finance and Planning Commission are responsible for undertaking these functions for the federal government (and also coordinate with the four provinces, GB, AJK and FATA on financial matters). Similarly, Planning & Development (P&D) Department and Finance Department in the provinces, GB and AJK have responsibility for managing the provincial finances and related planning functions.

Components of Budget

The two basic elements of any budget are the revenues and expenses. In the case of the government, revenues are derived primarily from taxes. Government expenses include spending on current goods and services, which economists call government consumption; government investment expenditures such as infrastructure investment or research expenditure; and transfer payments like unemployment or retirement benefits.

Budget in Pakistan has two components: Current (or non-development) and Development (or Capital). Each year, around 57 Ministries / Divisions of the Federal Government and nearly 190 Departments of the Provinces and States get budget allocations for financing their current and development operations.

Financial year in Pakistan starts from 1st July of a calendar year and ends at 30th June of the next calendar year. Budget is announced every year (usually in June). Typically, federal budget precedes the announcement of provincial budgets.