The International Monetary Fund (IMF) has asked Pakistan to address vulnerabilities in top 10 government entities that are at the "highest risk" of indulging in corrupt practices and also recommended merit-based appointments of heads in 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 for enforcing its recommendations by the end of October. However, the report has yet to be released, and this 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. The recommendations include publishing an action plan to mitigate risks in the top 10 government entities with the highest corruption risks and macro-critical exposures, based on a centralised assessment using pre-established and publicly available criteria.
The global lender has also proposed that Pakistan report annually on the progress of implementing the plan.
In one of the key recommendations to improve governance of the FBR, the IMF has recommended publishing the data on complaints, numbers of officials investigated for corruption, number of individuals sanctioned for corruption and number of cases passed to other enforcement agencies for action.
The IMF has prepared the report to improve governance in Pakistan, rule of law and ensure the judicial system facilitates businesses and investment instead of becoming a hurdle. The report has been prepared after holding meetings with nearly three-dozen government departments, state organs, including with 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 businesses and investment rather than acting as a hurdle. The report was compiled after consultations with nearly three dozen government departments and state organs, including a meeting with the chief justice of Pakistan.
To ensure that the entities responsible for accountability and oversight of the government remain independent, the IMF also wants Pakistan to ensure merit-based appointments in these organisations, sources added.
It has proposed a review of the legal frameworks governing the appointment of heads of key oversight 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 incumbent SECP chairman is about to end and the government is in the process of deciding whether to give him an extension or appoint his replacement. The SECP is responsible for the oversight of the corporate and equity markets while the CCP is responsible for ensuring competition in the economy.
The IMF has also proposed establishing the institutional independence of the Auditor General of Pakistan by amending its law. The AGP is currently regulated by the Ministry of Finance. The AGP performs the audit of the accounts of the federal and provincial governments. However, its reports and findings often remain unimplemented. There are also issues about the quality of these audit reports.
The global lender has also found major flaws in the weak governance structure of FBR. It has proposed to strengthen the governance and effectiveness of the FBR by improving its organisational structure and better aligning oversight and management with achieving core objectives.
Among the important recommendations, the IMF has suggested reducing the autonomy of FBR's field formations and enhancing their ability to identify and address key risks. The existing laws give extensive powers to a grade 20 officer of FBR, which in a democratic setup, should be exercised by the federal cabinet or parliament.
The IMF has recommended that Pakistan should also publish a tax simplification strategy by May of next year that reduces rate, schedules, special regimes, excessive withholding of taxes and advance taxes. The strategy should also include rationalizing the tax exemptions and withdrawing the rule making powers of the FBR.
The IMF seems not impressed by the FBR's performance. It has recommended enhancing the accountability of the FBR's operations by publishing the audit findings relating to Pakistan Revenue Automation Limited within one year. It has also proposed producing the initial public report tracking FBR's response to major audit findings, the sources added.
The IMF has also recommended strengthening the FBR headquarters' function by establishing executive committees, reducing the autonomy of the field formations and monitoring of the performance. The global lender wants a truly independent internal audit office of the FBR by separating it from reporting to the Member Inland Revenue Operations.
It has proposed the independent audit of the information technology system of the FBR and establishing an internal affairs unit under the direct supervision of the chairman FBR to enforce the integrity and anti-corruption policies within the tax machinery.
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