ISLAMABAD:
The International Monetary Fund (IMF) has asked Pakistan to address vulnerabilities in top 10 government entities that pose the “highest risk” of engaging in corrupt practices and also recommended appointment of heads of key oversight bodies on the basis of merit.
The bodies that the global lender has recommended for merit-based appointments in its Governance and Corruption Diagnostic Assessment report are the National Accountability Bureau, the Securities and Exchange Commission of Pakistan and the Competition Commission of Pakistan, according to government sources.
The government had committed to the IMF to publish the report by the end of July and provide an implementation plan to implement its recommendations by the end of October. However, the report is yet to be released, and the delay is among the issues holding up the announcement of a staff-level agreement between Pakistan and the IMF for the disbursement of the next loan tranches.
Sources said the IMF has recommended adopting and implementing a risk-based approach to address corruption vulnerabilities in federal agencies. Recommendations include publishing an action plan to mitigate risks in the top 10 government entities with the highest corruption risks and macrocritical exposures, based on a centralized assessment using pre-established and publicly available criteria.
The global lender also proposed that Pakistan should report annually on the progress of implementing the plan.
In one of the key recommendations to improve the governance of the FBR, the IMF recommended publishing the data on complaints, the number of officials investigated for corruption, the number of individuals sanctioned for corruption and the number of cases referred to other enforcement agencies for action.
The IMF has prepared this report to improve governance in Pakistan, the rule of law and ensure that the justice system facilitates business and investment instead of becoming an obstacle. The report was prepared after meetings with nearly three dozen government departments and state agencies, including the Chief Justice of Pakistan.
The IMF prepared this report to improve governance in Pakistan, strengthen the rule of law, and ensure that the justice system facilitates business and investment rather than being an obstacle. The report was compiled after consultations with nearly three dozen government departments and state bodies, including a meeting with the Chief Justice of Pakistan.
To ensure that entities responsible for government accountability and oversight remain independent, the IMF also wants Pakistan to ensure merit-based appointments in these organizations, sources added.
He proposed a review of the legal frameworks governing the appointment of heads of key oversight bodies, including the Competition Commission of Pakistan, the Securities Commission of Pakistan and the National Accountability Bureau, to promote merit-based, transparent and credible selection processes.
This recommendation comes at a time when the mandate of the outgoing SECP president is about to end and the government is deciding whether to grant him an extension or appoint his replacement. The SECP is responsible for monitoring corporate and stock markets, while the PCC is responsible for ensuring competition in the economy.
The IMF also proposed to establish the institutional independence of the Auditor General of Pakistan by amending its law. AGP is currently regulated by the Ministry of Finance. The AGP audits the accounts of the federal and provincial governments. However, its reports and conclusions often remain unimplemented. There are also issues regarding the quality of these audit reports.
The global lender also found major flaws in the weak governance structure of the FBR. He proposed to strengthen the governance and effectiveness of the FBR by improving its organizational structure and better aligning oversight and management with the achievement of core objectives.
Among the important recommendations, the IMF suggested reducing the autonomy of the FBR field formations and strengthening their capacity to identify and manage key risks. Existing laws confer extensive powers on a Grade 20 official of the FBR, which in a democratic framework should be exercised by the federal cabinet or parliament.
The IMF has recommended that Pakistan also release a tax simplification strategy by May next year that reduces rates, scales, special schemes, excessive withholding taxes and tax advances. The strategy is also expected to include rationalization of tax exemptions and withdrawal of regulatory powers from the FBR.
The IMF does not seem impressed with the FBR’s performance. It recommended strengthening accountability of FBR operations by publishing audit findings relating to Pakistan Revenue Automation Limited within one year. He also proposed to produce the first public report tracing the FBR’s response to the key findings of the audit, the sources added.
The IMF also recommended strengthening the FBR headquarters function by creating executive committees, reducing the autonomy of field formations and monitoring performance. The global lender wants an internal audit office that is truly independent of the FBR by separating it from dealings with member tax operations.
He proposed an independent audit of the FBR’s IT system and creation of an internal affairs unit under the direct supervision of the FBR chairman to enforce integrity and anti-corruption policies in the tax machinery.
