World Bank supports stronger PFM and digital services in Punjab

23 Oct 20

Public finance management reforms in the Pakistani state of Punjab have been boosted by $304m of World Bank financing as the government hopes to generate savings and create fiscal space for growth-generating investments.

 

The provincial government launched a roadmap for PFM reforms in 2015, which prioritised enhancing revenue, reducing transaction costs and maximising the returns on its investment.

A World Bank document called the results so far “impressive”, pointing to the expansion of the region’s services sales tax base from 43bn rupees in 2012-13 to 106bn in 2017-18, as well as the digitisation and automation of some tax and property records and increased transparency through the use of citizen budgets.

However, some outstanding areas remain and a new programme of reforms is intended to strengthen fiscal risk management and budget creation, as well as improving revenue collection and simplifying the tax administration process.

The programme will also focus on using technology to improve public service delivery.

“With prolonged restrictions of face-to-face services due to Covid-19, the programme will help the provincial government expand its existing citizen feedback model and accelerate the use of technology for revenue mobilisation and public procurement,” said Akmal Minallah, task team leader for the programme.

Punjab is Pakistan’s largest province, accounting for 55% of the population and 60% of the economy, so improving the quality of public services is seen as key to the country’s development.

The province has the largest civil service in the country, and this brings costs.

Pensions currently take up 12.3% of provincial revenue, with the number expected to rise to 23% by 2060 on current trends.

Its own tax receipts current account for just 0.8% of the province’s estimated economic output, which the World Bank said indicated the government might be collecting only a quarter of its tax potential.

The improvements to tax administration are hoped to unlock that potential extra revenue, and allow the government to invest in areas that will boost the development of the region.

“By helping Pakistan’s largest province to increase efficiency in its public expenditure, close its large tax gap and create fiscal space for growth-enhancing expenditures on infrastructure and human capital, the programme can contribute to a transformational change in the country, given that the other provinces tend to watch, replicate and emulate Punjab’s lead in reforms,” a World Bank document stated.

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