Data gaps linked to governance

Effective regulations, better governance can address budget discrepancy

ISLAMABAD:

An executive director of London-based Association of Chartered Certified Accountants (ACCA) has said that Pakistan can address the issue of large budget discrepancies by improving the governance framework, effective regulations and bringing information transparency.

In an interview with The Express Tribune, Lucia Real Martin said that the International Financial Reporting Standards (IFRS) are "gold standards" but local adjustments can be made, provided there is no deviation that undermines confidence. ACCA Executive Director Relations Lucia Real Martin spoke about a host of issues related to the association's possible support for improving public finance management in Pakistan, the future of the accounting profession, statistical discrepancies and implementation of the IFRS.

She spoke at length on a question about a Rs853 billion statistical discrepancy reported by the federal and four provincial governments in the accounts of fiscal year 2025-26. "There are a number of things to ensure that those discrepancies are not there. We need to contribute to those institutions in becoming credible and they can become credible, if they understand the importance of reporting transparent information and to do that they need to actually understand what they need to report on," said Martin.

She said that improvement in governance framework, training and knowledge can help address the statistical discrepancy in the budget. The governance framework definitely has to be one of the elements in addition to effective regulations to address large statistical discrepancies, she added.

The executive director said that four elements are to have credible institutions, which have governance frameworks that help bring transparency in information. Having all of that is professional capacity, and this is where the ACCA comes in to provide capacity not only at the technical level but at the ethical level, said Martin.

IFRS implementation

The Cabinet Committee on SOEs last week relaxed the international reporting standards to avoid booking losses in accounts of energy-sector companies and commercial banks due to the chronic circular debt.

"From ACCA's perspective, global standards are the gold standards, but even the global standards need a journey," said the executive director. She noted that over 140 countries are now applying the IFRS, although many have adapted to these standards according to their local context. Adopting the IFRS according to the pace of the country is not wrong and continuing to strive to embrace the global standards would give confidence to investors and the narrative to the government and institutions and promise to the youth that Pakistan is a country that can be global, she added.

She further explained that if the adjustment in these standards is to deviate from the global standards and to create a separate local environment, then it is a breach and once the dent is created, then the separation between the local environment and the global investment environment becomes challenging. Ongoing commitment to the global standards will continue to build confidence in the international arena, with the IMF and with investors, said Martin.

The Central Monitoring Unit (CMU) of the finance ministry had also warned against relaxing these standards but the Cabinet Committee on SOEs did not comply with the advice. According to Rule 9 of the IFRS, aging receivables previously treated as guaranteed recoverable now generate direct impairment charges, exposing systemic fiscal interconnectedness, warned the CMU. During her visit, the executive director also met with Finance Minister Muhammad Aurangzeb. She said that the ACCA has been discussing with Pakistan the possibility of cooperation in the service economy.

Ticket to overseas

Responding to a question about the ACCA affiliates and members settling in Dubai and London, Martin said there are always people who want to get either international experience or move abroad for a different life and this happens everywhere but obviously in Pakistan it is disproportionate.

She said that the answer to this is to build a service economy where organisations are part of global organisations or serve global clients and therefore young people in Pakistan can be able to work with the UK, the US and other Asian countries right from Pakistan.

Unlike a decline in interest in the accounting profession, Martin said that the trend is encouraging in Pakistan. But she added that there are only 22,000 active professional accountants in Pakistan and for the ambitions that the government has for export of services, this number is not enough. "Pakistan's young population is a goldmine, and these people are willing to become professional accountants." Accounting profession has a bright future, and it hinges on the young talent of Pakistan. ACCA members do not have authority to sign statutory audits of companies. But these members work for large corporate firms and perform all other tasks.

ACCA charges the fee in pound sterling. To a question, she said that in future fee structures can be considered in local currencies but she did not give a timeframe. There is a rate card for Pakistan, which is lower than in the UK, but it is still paid in pounds. The economic hardship cases are also acknowledged.