Audit of lenders under KPP awaited

Scrutiny delayed as Programme Management Unit could not be made functional

ISLAMABAD:

The government has failed to conduct an audit of wholesale lenders pertaining to subsidy claims under the Kamyab Pakistan Programme (KPP) due to its inability to ensure a fully functioning Programme Management Unit (PMU).

Sources told The Express Tribune that the PMU could not be made functional and as a result independent external auditors were not hired by the Finance Division.

While the PMU was tasked with validating the subsidy claims of wholesale lenders, the State Bank of Pakistan (SBP) has been entrusted to perform a “sanity check” of payments concurrently.

In a recent meeting of the Economic Coordination Committee (ECC), the Finance Division recalled that the Kamyab Pakistan Programme had been launched in 2021 with approval of the cabinet.

The programme’s features comprised Kamyab Karobar, Kamyab Kissan, Naya Pakistan Low Cost Housing, Kamyab Hunarmand and Sehatmand Pakistan.

The Finance Division stated that wholesale lenders had been selected through competitive bidding in line with the Public Procurement Rules 2004. Those lenders picked microfinance institutions (MFIs) for disbursement of loans to targeted applicants while the government undertook to pay the difference between “customer rate” and “bank rate” as mark-up subsidy.

According to a summary prepared for the ECC on September 21, 2021, the mechanism for subsidy claims and “loan loss payments” by wholesale lenders would be devised by the Finance Division in consultation with the SBP.

They will also ensure that such claims are fully validated by the PMU and audited annually by an independent external auditor to be hired by the Finance Division on a competitive basis. Cost and expenses for engagement of such services will be borne by the lenders.

According to the payment mechanism, the wholesale lenders will forward the consolidated claims of mark-up subsidy and credit loss to the PMU for validation. The PMU will then recommend the claims for payment by the SBP.

However, the unit could not be made functional and consequently independent external auditors were not hired by the Finance Division.

The ECC was also informed that the SBP had already been validating claims before seeking the sanctioning of funds by the Finance Division for projects like Pakistan Remittance Initiative (PRI) and the Sohni Dharti Remittance Programme.

The Finance Division proposed that the SBP may be entrusted with the task of validating the claims of wholesale lenders after due diligence.

The ECC reviewed a summary submitted by the Finance Division regarding the Kamyab Pakistan Programme and approved the proposal of entrusting the SBP to validate the claims of wholesale lenders after due diligence.

It directed that the requirement of conducting an additional external audit of such claims, as was applicable in the case of PMU, would not be applicable under the new process.

 

Published in The Express Tribune, February 19^th, 2023.

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