Summary of Chapter 4 – Fiscal Management

(From the HAQUE’S PIDE Reform Manifesto: Transforming Economy and Society)

Chapter 4 of the HAQUE’S PIDE Reform Manifesto focuses on transforming Pakistan's fiscal management system, identifying chronic structural weaknesses, and proposing reform strategies to align public finance with long-term economic growth and development goals.

A. Medium-Term Budget Management and Growth

The chapter begins by acknowledging Pakistan’s early success in development planning during the 1950s, which has since deteriorated due to weak fiscal discipline, rising politicization of budget allocations, and the absence of medium-term economic planning. Presently, the Ministry of Finance operates through ad-hoc mini-budgets, prioritizing short-term fiscal adjustments over economic growth and employment. The Planning Commission, once central to investment appraisal and strategy, has been reduced to a politically influenced PSDP allocator. HAQUE’S PIDE calls for converting the Planning Commission into a Growth Commission—independent, expert-led, and free of bureaucratic control—to coordinate the government on economic policy through the overseeing medium-term budget and growth strategy. For this

· The Growth Commission (GC) must be made of eminent economists selected for technical expertise and not bureaucratic and political connections. The method of selection must be in hands of financial sector naming sector experts and without politicians and bureaucrats.

· All policies must be whetted by the GC and presented to the cabinet jointly by GC and the proposing ministry

· The GC must regularly publish white papers on changing policies and budget numbers at least a month before legislation and convene and public debate involving all univerieits and think tanks.

· All development Partner reports, consultants and technical assistance must be whetted and peer reviewed in open forum led by the GC.

B. Budget Making Process

The existing budget process is input-based and focuses solely on expenditure with minimal concern for asset utility, outcomes, or returns. International lenders and bureaucrats dominate the process, while Parliament is largely excluded. Budget approval is ritualistic, offering scant opportunity for debate or scrutiny. HAQUE’S PIDE advocates for performance budgeting, merging development and current expenditures, involving Parliament meaningfully, and extending the budget process to a 60-day review window. It proposes a dedicated Budget Office within Parliament to provide non-partisan analysis.

C. Debt Management

Debt management in Pakistan is weak, with the country routinely breaching the Fiscal Responsibility and Debt Limitation Act’s 60% debt-to-GDP ceiling. Debt composition is increasingly domestic, resulting in high servicing costs. HAQUE’S PIDE proposes an autonomous Debt Agency to consolidate debt functions, oversee sustainability, and engage in professional debt market development. The agency would report to Parliament quarterly and hold public hearings to ensure transparency and accountability.

D. Public Investment

Public investment is undermined by the politicization of PSDP, which often funds projects based on patronage rather than merit or economic returns. There is little ex-post evaluation of investments, and completed projects frequently lack operational plans. HAQUE’S PIDE emphasizes the need to depoliticize PSDP, ensure evidence-based project appraisal, and focus on high-impact, productivity-enhancing investments.

The Public Sector Development Programme (PSDP) has long ceased to serve its intended purpose and now functions primarily as a political patronage tool rather than a vehicle for national development. Instead of pouring scarce public funds into fragmented, poorly executed projects with no ex-post evaluation or operational continuity, it is time to retire the PSDP entirely. The way forward lies in shifting toward performance-based governance, as outlined in the Planning Commission’s Framework for Economic Growth. Development should be integrated into the core mandates of line ministries, each held accountable through measurable outcomes and real-time monitoring. Keeping projects on the books for decades—locked in as “assets” while they lie incomplete or unusable—is not development; it is fiscal waste disguised as planning. Ending the PSDP and mainstreaming development within ministries would eliminate redundant approvals, reduce leakage, and refocus the state on outcomes, not optics.

E. Public Sector Enterprises (PSEs)

The chapter critiques the chronic inefficiency and fiscal burden of PSEs, which continue to accrue debt without reform. HAQUE’S PIDE recommends imposing hard budget constraints, establishing independent boards, ensuring operational autonomy, and linking management performance with profitability. Inefficient PSEs should be either restructured with clear plans or liquidated.

F. Pension Reform

Pakistan’s unfunded, defined-benefit pension system is deemed unsustainable. With liabilities rising by 25% annually, HAQUE’S PIDE advocates transitioning to a defined-contribution system, managed by private pension funds under regulatory oversight. This transition, while costly initially, is projected to reduce fiscal pressure over time.

G. Tax and Tariffs

The tax system is described as convoluted and inefficient, relying heavily on indirect taxes, withholding, and arbitrary exemptions. High tariff protection and cascading tax structures distort markets and deter investment. HAQUE’S PIDE calls for a simplified, fair, and growth-oriented tax regime—minimizing indirect taxes, harmonizing VAT, and universalizing income tax without exceptions. It warns that excessive documentation and regulatory complexity function as hidden taxation.

H. Public Wealth Management

The chapter underscores the poor management of Pakistan’s vast public commercial assets. With no centralized asset registry or strategy, valuable land and infrastructure remain underutilized. HAQUE’S PIDE proposes creating Public Wealth Funds to professionally manage and monetize public assets, generating non-tax revenue and improving fiscal sustainability.

Conclusion
Chapter 4 of the HAQUE’S PIDE Reform Manifesto presents a comprehensive agenda to overhaul Pakistan’s fiscal institutions. It emphasizes shifting from reactive, short-term budgeting toward strategic, growth-oriented fiscal management rooted in performance, accountability, and institutional reform. Without such transformation, Pakistan’s economy is unlikely to achieve sustained stability or development.