ISLAMABAD:
The International Monetary Fund (IMF) has asked Pakistan to address vulnerabilities in the top 10 government entities that are at the “highest risk” of indulging in corrupt practices and also recommended merit-based appointments of heads of key oversight bodies.
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 enforce its recommendations by the end of October. However, the report is yet to be released and this delay is one of the issues delaying the announcement of a staff-level agreement between Pakistan and the IMF for the disbursement of the next tranches of the loan.
Sources said the IMF has recommended adopting and implementing a risk-based approach to address corruption vulnerabilities in federal agencies. The recommendations include publishing an action plan to mitigate risks in the top 10 government entities with the highest risks of corruption and macro-critical exposures, based on a centralized assessment using pre-established and publicly available criteria.
The global lender has also proposed that Pakistan report annually on the progress of the plan’s implementation.
In one of the key recommendations to improve FBR governance, the IMF recommended publishing data on complaints, the number of officials investigated for corruption, the number of people sanctioned for corruption and the number of cases referred to other law enforcement agencies for action.
The IMF has prepared the report to improve governance in Pakistan, the rule of law and ensure that the judicial system facilitates business and investment instead of becoming an obstacle. The report was prepared after holding meetings with nearly three dozen government departments and state bodies, including the Chief Justice of Pakistan.
The IMF has prepared the report to improve governance in Pakistan, strengthen the rule of law and ensure that the judicial system facilitates business and investment rather than acting as 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 the entities responsible for government accountability and oversight remain independent, the IMF also wants Pakistan to ensure merit-based appointments in these organizations, the sources added.
It has proposed a review of the legal frameworks governing the appointment of heads of key supervisory bodies, including the Competition Commission of Pakistan, the Securities and Exchange Commission of Pakistan and the National Accountability Bureau, to promote merit-based, transparent and credible selection processes.
The recommendation comes at a time when the tenure of the current SECP chairman is about to end and the government is in the process of deciding whether to grant him an extension or appoint his replacement. The SECP is responsible for the supervision of corporate and securities markets, while the CCP is responsible for ensuring competition in the economy.
The IMF has also proposed to establish the institutional independence of the Auditor General of Pakistan by amending its law. Currently the AGP is regulated by the Ministry of Finance. The AGP audits the accounts of the federal and provincial governments. However, their reports and conclusions are often not applied. There are also questions about the quality of these audit reports.
The global lender has also found major flaws in FBR’s weak governance structure. It has proposed strengthening the governance and effectiveness of the RBA by improving its organizational structure and better aligning oversight and management with the achievement of core objectives.
Among the important recommendations, the IMF has suggested reducing the autonomy of the FBR field formations and improving their capacity to identify and address key risks. Existing laws give wide powers to a Grade 20 FBR officer, which in a democratic setup 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, schedules, special regimes, excessive withholding taxes and advance taxes. The strategy should also include rationalization of tax exemptions and withdrawal of regulatory powers of the FBR.
The IMF does not seem impressed by the FBR’s performance. It has recommended improving accountability of FBR operations by publishing audit results related to Pakistan Revenue Automation Limited within one year. He also proposed to produce the initial public report that tracks the FBR’s response to the main findings of the audit, the sources added.
The IMF also recommended strengthening the role of the FBR headquarters by establishing executive committees, reducing the autonomy of field formations and monitoring performance. The global lender wants a truly independent FBR internal audit office, separating it from reporting to members of Inland Revenue Operations.
It has proposed independent audit of the FBR’s information technology system and establishment of an internal affairs unit under the direct supervision of the FBR chairman to enforce integrity and anti-corruption policies within the tax machinery.
