Investor Presentaiton

Chapter IX - Public Financial Management (PFM) Reform services for the population of the Province have together created the need for a new PFM reform paradigm. Furthermore, a Public Expenditure and Financial Accountability (PEFA) Assessment, 2019 of the Government of the Punjab, was recently undertaken by the World Bank and DFID, UK to help identify gaps in the PFM system in the Punjab. Some of the critical areas identified by PEFA 2019 include weaknesses in policy-based budgeting, unreliability of Provincial budgets due to inaccurate revenue forecasting, low predictability in budget execution, ineffective accountability mechanisms and fiscal risks due to operations outside financial reports. Summary of Punjab's PEFA Assessment Score A B C D Total Result 2 (7%) 5 (16%) 11 (35%) 13 (42%) 31 (100%) A Indicates perfect result in terms of compliance with the criteria which is based on the notified standards or best practices B Indicates good result largely in compliance with the criteria C Reflects basic performance D When the performance is less than the basic level or is absent or due to insufficient information The findings of PEFA were supplemented with a gap analysis carried out by the Sub-National Governance (SNG) Programme in consultation with the Finance Department. Thus, the PFM Reform Strategy (PFM-RS), 2020 provides a set of actions to plug the gaps in PFM in Punjab identified through PEFA 2019 and the gap analysis carried out by the SNG programme. PFM Reform Strategy 2020 Structure of PFM Reform Strategy Pillars Result Areas 9 Pillars 36 Result Areas Addressing major areas of PFM systems On reform dimensions within a pillar Actions 217 Actions To achieve Result Areas Experience in Pakistan and other countries points clearly to the fact that PFM reform is a complex and time- consuming process. While some incremental improvements can be made fairly quickly, the comprehensive overhaul of the PFM system will usually extend to a decade or more. A key role of the PFM-RS in this situation is to set out the longer-term vision for a strengthened PFM system and to clearly define the priorities and sequencing of the reform process. Established international good practice is that PFM reform should start with putting the basic systems in order - "First Things First". More complex reforms, such as Performance budgeting, can only be successfully implemented once the core PFM systems are in good order. The PFM-RS establishes a long-term framework for PFM reform in Punjab, distinguishing between the short & medium term (2020-2023) and the long term (2024-30) interventions. This permits clear identification of the most urgent areas in which reforms should be commenced immediately from those reforms which should be undertaken in the medium and longer term. To cope with the wide span of PFM, the PFM-RS 2020 is based on a total of nine "Pillars", each of which addresses a major area within the PFM system. The Pillars are presented in a 'Results-Framework' that specifies the vision, result areas, issues, and recommended actions to counter these challenges. Page 72

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