Public Finance

In a rare but necessary administrative call to streamline fiscal discipline, the Government of Pakistan has directed all Principal Accounting Officers (PAOs) to surrender their anticipated savings for FY 2024–25 by April 30, 2025. This mandate, issued through two back-to-back Office Memorandums by the Ministry of Finance, signals a tightened grip on public expenditure management and reflects rising concern over fiscal slippages.

The move follows a directive from the Public Accounts Committee (PAC) aimed at improving fund utilization, enabling reallocation to more pressing needs, and ensuring that unused budgeted amounts don’t sit idle in departments until the end of the fiscal year.

Surrender Before Spending: What It Means

The call for timely surrender includes three critical spending heads:

• Running of Civil Government (ERE and Non-ERE Grants)
• Subsidies
• Development Funds under the Revised PSDP ceiling of Rs. 1,100 billion

This re-emphasizes fiscal prudence in both current and development budgets, acknowledging that unspent balances can be redirected towards underfunded but high-impact areas. A key concern has been the excess punching of funds in the SAP system, particularly under the Public Sector Development Programme (PSDP), which had initially been approved at Rs. 1,400 billion but was subsequently revised down to Rs. 1,100 billion.

To avoid audit objections and reconcile budget execution with the revised fiscal realities, the Finance Division’s Budget Wing has asked PAOs to issue surrender orders, so the adjustments can be made in the SAP system in time for revised estimates and finalization of budget 2025–26.

Implications for Development Spending

The reduction in PSDP allocations has direct implications for federal development spending, which already suffers from fragmented project execution, thin allocation spreads, and chronic under-utilization. Surrendering funds early allows for a more strategic reallocation—especially as the Finance Division faces pressure to curtail fiscal deficits and align with IMF recommendations for prudent budgeting.

Furthermore, the Finance Division has already raised concerns over ministries submitting excess NIS (New Item Statements) beyond the sanctioned ceilings, prompting this corrective action to pre-empt audit flags.

Policy Significance and Outlook

This initiative reflects an evolving fiscal governance model in Pakistan, where resource realism and accountability are gradually taking center stage. While budgeting historically has suffered from poor credibility and weak enforcement of ceilings, the recent surrender orders signal a shift towards performance-based and enforceable fiscal targets.

The policy will likely improve the following:

• Transparency in expenditure tracking
• Avoidance of rushed year-end spending (“December Syndrome”)
• Better predictability in macro-fiscal frameworks

However, a critical question remains: will this practice translate into a more institutionalized medium-term expenditure framework (MTEF), or will it remain a reactive, ad hoc response?

A more proactive approach would involve:

• Monthly or quarterly reviews of expenditure versus allocations
• Digitized budget tracking dashboards
• Institutional capacity building in line ministries to estimate savings realistically

Reference: This policy update is based on the official memos issued by the Ministry of Finance, Government of Pakistan, dated April 9 and April 22, 2025, and disseminated to all federal PAOs and relevant planning officials.

This article was published on Publicfinance.pk.