## IMF Technical Report — Pakistan PIMA / Climate-PIMA (1pakea2023002) ## Source details **Canonical URL:** [IMF Technical Report — Pakistan PIMA / Climate-PIMA (1pakea2023002)](https://www.imf.org/-/media/files/publications/cr/2023/english/1pakea2023002.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2023/english/1pakea2023002.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2023/english/1pakea2023002.pdf.json) --- ### Context and overarching findings - Public capital stock in Pakistan stood at 55 percent of GDP (2019). - Federal public investment accounts for less than half of all public investment in Pakistan. - Pakistan’s capital stock per capita was USD 1,900 per capita (2019), the lowest among the selected peers. - Hybrid public investment efficiency gap estimated at around 38 percent. - Pakistan is highly exposed to climate risks: increasingly frequent and severe floods, heatwaves, and droughts; the 2022 floods affected more than 30 million people and initial estimates to rebuild affected areas amount to USD 16.3 billion. - Pakistan scores slightly above average versus emerging market peers on PIMA institutional design; effectiveness scores lag design scores. ### Public investment scale, composition, and execution (key statistics and trends) - Annual public investment flow: nearly 6 percent of nominal GDP in 1992 → less than 2 percent in 2000; marked peaks in 2007 and 2017. - Nominal PSDP and related figures: - Total cost to complete projects in the PSDP: Rs. 10.7 trillion. - Planning Commission throw-forward / alternative total: Rs. 10.729 trillion (note mission could not reconcile alternative figure Rs.10.222.4). - PSDP budget allocation in 2022-23: Rs. 727 billion (also reported as Rs. 727.5 billion in Table 3.1). - New projects added in the last budget: total cost Rs. 2.3 trillion (2022-23 context). - Planning Commission: New projects No. 244; Total cost Rs. billion 2,261.9. - Funded ongoing projects No. 909; Total cost Rs. billion 7,961.5. - Average years to completion (assuming current development budget funding and no new projects): 14.1 years. - Financing sources (2021-22): - Three-quarters of public sector investment was budget funded. - Additional 15 percent financed through external sources. - Around 40 percent of autonomous entities’ capital investment was still financed through the PSDP in 2021-22. - Subnational execution: - Capital investment executed at subnational level averaged 60 percent of total capital spending in the last six years. - PPP portfolio (1990–2019): - 108 infrastructure-based PPP contracts reached financial closure with approximate USD 28.4 billion (2019 dollars) deal value. - Sector distribution: Energy 94 deals (87 percent of portfolio value); Ports 9 deals (11 percent); Remaining 5 deals (4 percent). - Energy projects: mainly take-or-pay, availability payment type contracts; 33 contracts have credit enhancement in the form of sovereign guarantees. - Annual debt servicing costs related to power sector contractual obligations noted as exceeding Rs. 100 billion. ### Capital stock, outcomes, and efficiency - Public capital stock value trends: - Declined markedly in the 1990s and mid-2000s; recovered to around 1995–1999 level by 2019. - Capital stock (PPP adjusted) in 2019: 54.9 percent of GDP (sixth of eight peers). - Infrastructure access indicators (selected comparisons): - Secondary teachers per 1000 people: Pakistan 1.8 → 3.3 (Most Recent Year); Peers 1: 3.5 → 5.1. - Electricity production per capita (kWh per 1000 people): Pakistan 0.4 → 0.7; Peers 1: 0.7 → 1.9. - Hospital beds per 1000 people: Pakistan 0.6 → 0.6; Peers 1: 1.3 → 1.3. - People using at least basic drinking water services: Pakistan — to 90% (Most Recent Year); Peers 1 — to 95%. - Conclusion: Significant potential to improve access and quality given existing capital stock per capita. ### Institutional assessment (PIMA and Climate-PIMA high-level scores) - PIMA overall: - Better scores in implementation than in allocation and planning. - Institutional design: three out of fifteen institutions score HIGH; ten MEDIUM; two LOW (planning and budget comprehensiveness). - Effectiveness: only project implementation scores HIGH; four institutions score LOW (fiscal targets and rules, planning, maintenance, monitoring public assets). - Selected PIMA institution highlights (institutional strength, effectiveness, reform priority): - Fiscal targets and rules: Institutional Strength = HIGH; Effectiveness = LOW; Reform priority = High. - National and sectoral planning: Institutional Strength = LOW; Effectiveness = LOW; Reform priority = High. - Project appraisal: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = Medium. - Procurement: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = Low. - Management of project implementation: Institutional Strength = HIGH; Effectiveness = HIGH; Reform priority = Low. - Climate-PIMA summary (C1–C5 institutional strength / reform priority): - C1 Climate-aware planning: Institutional Strength = LOW; Reform priority = Medium. - C2 Coordination between entities: Institutional Strength = HIGH; Reform priority = Low. - C3 Project appraisal and selection: Institutional Strength = LOW; Reform priority = High. - C4 Budgeting and portfolio management: Institutional Strength = MEDIUM; Reform priority = High. - C5 Risk management: Institutional Strength = MEDIUM; Reform priority = Medium. ### Appraisal, selection, and PPP oversight (findings) - Manual for Development Projects (2021) is operational but not fully implemented. - Feasibility studies funded in 2022-23: 47 studies ranging Rs. 5 million to Rs. 500 million; about two thirds cost less than Rs. 150 million. - Gaps: - Data quality issues in iPAS; samples of feasibility studies/CBAs not publicly available. - Central guidance needed on foundational appraisal inputs (discount rate, shadow pricing, valuation of GHG emissions & climate impacts). - No published selection criteria to guide PSDP allocations beyond rate of return. - PPP framework fragmented; absence of comprehensive register and consolidated fiscal reporting for contingent liabilities. - Fiscal/P3A specifics: - P3A identified portfolio of 47 projects, mainly transport and communication. - The 2022-23 development program includes appropriations of Rs. 73 billion (~USD 240 million). - Three transport projects approved completing a total of $3.2 billion authorized by the board of P3A. ### Budgeting, cash management, and execution issues - MTFF process: Finance Division prepares draft MTFF in October; final MTFF published in Medium-Term Budget Strategy Paper in April and Annual Budget Statements in June. - Multi-year budgeting gaps: - No multi-year ceilings set by Planning Commission at ministry or sector level for PSDP. - Finance Division issues multi-year indicative ceilings for current spending but only one-year for PSDP. - Cash management and releases: - Cash-flow forecasts prepared monthly; Development Budget Release Strategy for 2022-23 announced releases at 10, 20, 30 and 40 percent for each quarter. - Misalignment between cash releases and project cash needs causes implementation delays and inefficiencies. - Budget execution and throw-forward: - Aggregate execution of development expenses: 71 percent on average over last 5 years. - Planning Commission’s informal policy: allocate annually 80 to 90 percent of available domestic development funding to ongoing projects. - Example cost overrun: Golen Gol Hydropower Project final cost Rs. 30 billion vs initial estimate Rs. 7 billion. ### Project monitoring, evaluation, asset registers, and IT systems - Monitoring systems: - iPAS (operational 2021-22) to track PC-I/PC-II; not fully populated with ongoing projects; exchanges data with FABS; not currently used to tag climate projects. - PMES (operational 2008) tracks PC-III and PC-IV; scheduled to cease 2025-26 when functions absorbed into iPAS. - FABS (SAP) records releases, re-appropriations, supplementary grants, surrenders; accounting shift to modified cash not implemented, limiting commitments and asset management functionalities. - Asset management: - Asset registers required for fixed assets costing a minimum of Rs. 100,000 at historical cost; no central consolidation; depreciation not recorded in operating statements. - Routine maintenance underfunded: federal repair and maintenance expenses reported as 0.2 percent of long-term assets. - Road maintenance funding gap: increased from 27 percent in 2010-11 to 86 percent in 2019-20. - National Highway Authority maintains Road Asset Management System and updates asset values using replacement costs. - Data quality and analytical gaps: - iPAS data entry lacks central quality control; inconsistent classification and approval dates. - No central procurement database with analytical capability; e-Procurement planned to address gap. ### Procurement (summary) - Legal framework: Public Procurement Rule 2004 prescribes open competition; procuring agencies must publish final evaluation report fifteen days prior to award. - Practicals: - Most procurements above Rs. 3 million are advertised publicly. - Complaint resolution averages two to six months; PPRA decisions not published; significant fees for appeals reduce effectiveness. - Provincial monitoring examples: Balochistan PPRA 2019-2020 showed 52 percent compliance; key violations in evaluation criteria clarity (60 percent of violations). - Reform directions: - Launch e-Procurement systems across federal and provincial governments by end-2024 (PPRA responsibility). - Build a procurement database with analytical capability and enhance PPRA monitoring capacity. ### Climate risks, mitigation, adaptation and fiscal implications (key figures) - Temperature and extreme heat projections: - Even under declining global emissions, average annual temperatures expected to rise by 0.8 degrees in the next two decades. - Under SSP 3-7.0, median annual temperature predicted to rise 4.6 degrees above 2015 by end of century; number of days above 40 degrees rising from around 60 to over 100. - Historical climate impacts: - Since early 2000s, climate disasters directly affected more than 4 million people annually on average, killed 500 people per year, and caused USD2 billion in material damages per year. - Hydrological hazards (floods and landslides) more than 70 percent of recorded climate event occurrences. - 2022 floods: more than 30 million people affected; over 1,700 fatalities (children one third of casualties); Sindh accounted for nearly 70 percent of total damages/losses. - Nationally Determined Contribution and costs: - 2021 Revised NDC: 15 percent unconditional emissions reduction; 35 percent conditional on international grant finance (combined 50 percent reduction by 2030 against Initial NDC projection). - NDC projected total cost of implementation: USD 200 billion by 2030. - Clean energy transition estimated costs: USD 101 billion by 2030 and further USD 65 billion by 2040. - Renewable energy expansion projected: around USD 50 billion by 2030 and USD 80 billion by 2040. - Additional USD 20 billion to upgrade the distribution network. - MoCC estimates adaptation costs around USD 86 billion to 2030. ### Climate-PIMA institutional findings and priorities (selected) - Coordination on climate actions is relatively strong through the National Climate Change Policy Implementation Framework and NCCP Implementation Committee; however MoCC and Climate Change Authority capacity is weak. - Major gaps: - No centralized assessment of exposure of public infrastructure to climate-related risks. - Building codes and urban planning largely do not address climate risk or emissions mitigation. - Appraisal and PPP frameworks do not systematically include explicit climate-risk methodologies or valuation of GHG impacts. - Finance Division has initiated green tagging and requested ministries to estimate climate-related shares in budgets (2023-24 Budget Call Circular). - Key climate-related numeric targets and timelines (selected from recommendations): - Identify and document infrastructure assets exposed to climate risks (NDMA, 2024). Priority Medium. - Finalize and publish the handbook on incorporating climate resilience in sectoral planning and project preparation (Planning Commission, 2023). Priority High. - Finalize Climate Change Resilient Urban Human Settlement Strategy and incorporate measures in building codes/urban planning (MoCC, 2023). Priority High. - Develop guidance on climate-sensitive appraisal inputs (Planning Commission, December 2024). Priority Medium. - Implement green budgeting, publish green budget statement and long-term fiscal sustainability analysis considering climate scenarios (Finance Division, from mid-2023). Priority Medium. - Develop and publish PSDP project selection criteria that incorporate climate change criteria (Planning Commission and NEC, Dec 2024). Priority High. - Train staff to strengthen climate oversight capacity (Various). Priority High. ### Selected high-level PIMA and Climate-PIMA recommendations (with lead agency and timing — selected) - Investment Strategy and Planning - Develop a new five-year strategy identifying major projects across all sectors and funding sources (Planning Commission, Dec 2024). Priority High. - Strengthen appraisal for large projects, increase independent scrutiny, and guidance on key appraisal inputs (Planning Commission, Dec 2024). Priority Medium. - Present in budget documentation summary information on key aspects of the PSDP and wider public investment program (Finance Division & Planning Commission, from mid-2023). Priority Medium. - Update PPP regulatory and appraisal frameworks (P3A, June 2024). Priority Medium. - Reinvigorate SOE Triage implementation for privatization/restructuring of SOEs (Finance Division, June 2025). Priority Medium. - Allocation of Investment - Develop and publish criteria for selecting projects to receive funding in the PSDP (Planning Commission and NEC, Dec 2024). Priority High. - Conduct a one-time review of all technically approved projects and reduce the approved projects to high priority projects (Planning Commission, Dec 2024). Priority High. - Set multi-year indicative budget ceilings by ministry (Planning Commission, June 2024). Priority Medium. - Investment Implementation - Utilize project monitoring data for portfolio analysis and increase compliance with ex-post reviews (Planning Commission, June 2025 / Dec 2025). Priority Medium/Low. - Publish procedures for federal ministries to retain and publish public asset information and maintenance methodologies (Finance Division and Planning Commission, various). Priority Medium/Low. - Increase use of e-procurement and monitoring/reporting on procurement (PPRA, Dec 2024). Priority Medium. - Climate-Sensitive Public Investment (selected) - Identify sectoral contributions to climate mitigation and adaptation targets and prepare costed investment plans; publish handbook on incorporating climate resilience in sectoral planning and project preparation (Planning Commission, 2023). Priority Medium/High. - Finalize Climate Change Resilient Urban Human Settlement Strategy; add climate-resilience and mitigation measures in building codes/urban planning guidelines (MoCC, 2023). Priority High. - Develop guidance on climate-sensitive appraisal inputs (Planning Commission, Dec 2024). Priority Medium. - Implement green budgeting, publish climate-related spending for FY2023-24 and extend green tracking to provinces (Finance Division; FY23/24 and FY24/25 Budget timelines). Priority Medium. - Train staff across MoCC, Planning Commission, Climate Change Authority (ongoing; target mid-2024 and end-2024 actions). Priority High. ### Action plan highlights and IT / capacity priorities - IT systems: - Consolidate PMES functions into iPAS by 2025-26; improve iPAS data quality and analytical reporting; modify iPAS to tag climate mitigation and adaptation projects. - FABS: realize unimplemented capabilities for commitments and asset management by adopting modified cash accounting changes. - Capacity and training: - Incorporate climate change modules into Pakistan Planning and Management Institute and Secretariat Training Institute curricula. - Expand in-country training and use development partner training in short term; develop domestic training capacity for medium/long term. - Annex 1 selected timing (illustrative): - iPAS and PMES integration and dashboards: PC to develop dashboards and monitoring reports by Dec 2024 / June 2025. Priority Medium. - PPP register and periodic reporting on contingent liabilities: Finance Division and P3A, Sep 2024. Priority High. - Multi-year ceilings and rules to restrict within-year adjustments: Finance Division and PC, End 2023 — Jun 2024 timeframes. *Source: IMF Technical Report — Public Investment Management Assessment (PIMA) and Climate-PIMA for Pakistan (1pakea2023002).* ### Preface ____________________________________________________________________________ 6 ### Preface ### Mission mandate and timing - At the request of the Ministry of Finance of Pakistan, a team from the IMF’s Fiscal Affairs Department and the World Bank undertook a combined Public Investment Management Assessment (PIMA) and Climate PIMA (Climate-PIMA) during the period from March 14 to March 28, 2023. ### Mission leadership and team composition - Mission lead: Ms. Michelle Stone. - IMF Fiscal Affairs Department team members: Mr. Bryn Battersby, Mr. Fazeer Sheik Rahim, and Mr. Ian Hawkesworth. - Short-term experts: Mr. David Gentry and Ms. Poldy Osorio Alvarez. - World Bank specialist: Syed Wajahat Ali Shah, Procurement Specialist. ### Principal government interlocutors and institutions consulted - Finance Division engagements: - Finance Secretary, Mr. Hamed Yaqoob Sheikh. - Additional Finance Secretary (AFS) External Finance, Mr. Ali Tahir. - AFS Budget, Mr. Tanvir Butt. - Economic Advisor, Dr. Imtiaz Ahmad. - Sr. Joint Secretary Corporate Finance, Dr. Imran Khan. - Joint Secretary Budget I, Mr. Iftikhar Amjad. - Joint Secretary Budget III, Mr. Obaid Anwar. - Joint Secretary Debt, Mr. Nawaz Aalam. - Staff in the Budget, Corporate Finance, Debt, and Economic Wings. - Ministry of Planning, Development and Special Initiatives (Planning Commission) engagements: - Joint Chief Economist Economic Policy, Mr. Zafar ul Hassan. - Chief Employment and Growth, Mr. Shahid Zia Cheema. - Member Climate Change, Ms. Nadia Rahman. - Chief Water, Mr. Asghar Ali. - Chief Power, Mr. Arshad Khan. - Chief Evaluation, Mr. Ali Talpur. - Chief Education, Ms. Mumtaz Ali Sheikh. - Chief Public Investment Authorization, Hafiz Shahid Abbas. - Chief Governance, Mr. Javed Sikandar. - Chief Energy, Finance and Economic Section, Mr. Inayat Qureshi. - Staff in the Economic Appraisal, Growth and Employment, Macroeconomic, Plan Coordination, Public Investment Authorization, Public Investment Programming and Monitoring sections. - Other government entities and subnational consultations: - Ministries: Climate Change, Power, Communications, Education. - Agencies and bodies: National Highway Authority, National Disaster Management Fund, National Disaster Management Authority, Pakistan Competition Commission, Public Private Partnership Authority (P3A), Auditor General Pakistan, Public Procurement Regulatory Authority. - Governments consulted: Baluchistan, Khyber Pakhtunkhwa, Punjab and Sindh. ### Acknowledgements and coordination support - The mission thanks the Government of Pakistan for cooperation and constructive discussions. - Specific acknowledgements: Mr. Iftikhar Amjad and Ms. Ayesha Javed in Finance Division; Mr. Zafar ul Hassan and Mr. Shahid Cheema in Planning Commission for coordinating mission activities and hospitality. - Logistical support from the IMF Resident Representative Office: Ms. Esther Perez (IMF Resident Representative), and Mr. Zafar Hayat and Mr. Muhammad Ali. ### Report preparation note - This final report reflects comments received from the Ministry of Finance, the Ministry of Planning, Development and Special Initiatives, other officials in the Government of Pakistan and those from IMF reviewers. *Source: Preface, 1pakea2023002 - Preface* ### Executive Summary ### Executive Summary ### Context and overarching findings - With Pakistan’s rapid population growth and large diverse country, it is imperative that public infrastructure effectively supports economic growth and service delivery. - Federal public investment accounts for less than half of all public investment in Pakistan. - Pakistan’s capital stock and efficiency of public investment are both relatively low compared to peers. - Pakistan is highly exposed to climate risks: all modelled global warming scenarios suggest weather patterns will become more unstable and severe, with increasingly frequent and severe floods, heatwaves, and droughts threatening infrastructure. ### Institutional assessment (PIMA) - The report applies the Public Investment Management Assessment (PIMA) framework and finds: - Pakistan scores slightly above average compared to emerging market economies that have undertaken the PIMA to date. - Institutional design scores are higher than effectiveness scores, reflecting incomplete implementation of reforms (e.g., PFM Act 2019 and the 2021 Manual for Development Projects). - Key summary points from Table 1 (selected): - A. Planning - Fiscal targets and rules: Institutional Strength = HIGH; Effectiveness = LOW; Reform priority = High. - National and sectoral planning: Institutional Strength = LOW; Effectiveness = LOW; Reform priority = High. - Coordination between entities: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = Low. - Project appraisal: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = Medium. - Alternative infrastructure financing: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = High. - B. Allocation - Multi-year budgeting: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = Medium. - Budget comprehensiveness and unity: Institutional Strength = LOW; Effectiveness = MEDIUM; Reform priority = Medium. - Budgeting for investment: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = High. - Maintenance funding: Institutional Strength = MEDIUM; Effectiveness = LOW; Reform priority = Low. - Project selection: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = High. - C. Implementation - Procurement: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = Low. - Availability of funding: Institutional Strength = HIGH; Effectiveness = MEDIUM; Reform priority = Medium. - Portfolio management and oversight: Institutional Strength = MEDIUM; Effectiveness = MEDIUM; Reform priority = Medium. - Management of project implementation: Institutional Strength = HIGH; Effectiveness = HIGH; Reform priority = Low. - Monitoring of public assets: Institutional Strength = MEDIUM; Effectiveness = LOW; Reform priority = Medium. ### Climate-sensitive public investment (Climate-PIMA) - The 2021 Climate-PIMA module is applied to assess climate-relevant aspects: - Pakistan has a strong framework for climate action and is ahead of many peers in recognizing sustainable and resilient public infrastructure, but climate-sensitive public investment management institutions are at an early stage. - Coordination on climate relevant actions is high due to frameworks such as the National Climate Change Policy Implementation Framework. - Gaps remain in allocating Pakistan’s Nationally Determined Contribution across sectors/levels of government and finalizing the National Adaptation Plan. - Key summary points from Table 2 (C-PIMA): - C1 Climate-aware planning: Institutional Strength = LOW; Reform priority = Medium. - C2 Coordination between entities: Institutional Strength = HIGH; Reform priority = Low. - C3 Project appraisal and selection: Institutional Strength = LOW; Reform priority = High. - C4 Budgeting and portfolio management: Institutional Strength = MEDIUM; Reform priority = High. - C5 Risk management: Institutional Strength = MEDIUM; Reform priority = Medium. ### Planning, appraisal, and PPPs - The Planning Commission and the Ministry of Climate Change (MoCC) are developing guidance to operationalize requirements to consider climate change adaptation and mitigation in project development and appraisal. - Implementation of updated appraisal methodology (including climate adaptation and mitigation) is timely and needed; similar rules and rigor should apply to all major projects regardless of financing source. - PPP framework is fragmented; updating complementary PPP regulation led by the PPP Agency is important given plans to expand PPPs. - The Finance Division should actively monitor fiscal risks across the entire PPP portfolio at federal and provincial levels. ### Budget constraints, PSDP affordability, and execution - Pakistan’s tight fiscal environment heightens the importance of selecting the right projects for funding. - The PFM Act requires technical approval for all projects before budget funding—this requirement should be maintained. - Selection criteria to guide allocation of limited budget resources are not in place and would help align projects with policy and climate commitments. - Implementation challenges: - Funding allocated to ongoing projects in the PSDP is insufficient to meet project implementation plans, slowing project delivery and creating inefficiencies and potential governance challenges. - Weaknesses in expenditure planning and control are evidenced by high reliance on virements and supplementary grants. - PSDP unaffordability (explicit figures): - Total cost to complete projects in the PSDP is Rs. 10.7 trillion. - PSDP budget allocation in 2022-23 was Rs. 727 billion. - New projects added in the last budget have a total cost of Rs. 2.3 trillion. - Separate preparation and oversight of the current budget (Finance Division) and the development budget (Planning Commission) can lead to inconsistent and sub-optimal decision making. ### Project monitoring, evaluation, and staff capacity - On paper, project and portfolio implementation and monitoring systems are sound. - Implementation of current requirements for ex-post evaluation and establishment of more active portfolio oversight would better inform decision makers. - Strong systems to record project-level information exist and could support analytical portfolio reports (e.g., strategic reports to NEC). - Human resources: - Government has some skilled staff capable of advancing reforms, but implementation across the public sector will require focused and sustained effort. - Building knowledge of climate change aspects across all stages of the project cycle is a priority. ### High-level recommendations (selected from Table 3) - Investment Strategy and Planning - Develop a new five-year strategy identifying major projects across all sectors and funding sources to guide sectoral investment plans (Planning Commission, Dec 2024). Priority: High. - Strengthen the appraisal process for large projects, increase independent scrutiny, and develop guidance on key appraisal inputs (Planning Commission, December 2024). Priority: Medium. - Improve information, scrutiny and coordination of major projects regardless of funding source and the fiscal risks they might create (Finance Division / Planning Commission, various). Priority: High. - Present in budget documentation summary information on key aspects of the PSDP and the wider public investment program (Finance Division & Planning Commission, from mid-2023). Priority: Medium. - Update and complement the regulatory framework and appraisal methodologies for PPPs across sectors and level of governments (P3A, June 2024). Priority: Medium. - Reinvigorate action to implement the SOE Triage report on privatization and restructuring of SOEs (Finance Division, June 2025). Priority: Medium. - Allocation of Investment - Develop and publish criteria for selecting projects to receive funding in the PSDP (Planning Commission and NEC, Dec 2024). Priority: High. - Conduct a one-time review of all technically approved projects and reduce the approved projects to high priority projects (Planning Commission, December 2024). Priority: High. - Examine scope to reduce within-year adjustments of capital expenditure (including restricting addition of new projects through supplementary grants or virements) (Finance Division, December 2023). Priority: Medium. - Set multi-year indicative budget ceilings by ministry (Planning Commission, June 2024). Priority: Medium. - Investment Implementation - Utilize project monitoring data for analysis of portfolio trends and increase compliance with ex-post review requirements (Planning Commission, various). Priority: Medium/Low. - Publish procedures for federal ministries to retain and publish information on public assets and maintenance methodologies (Planning Commission and Finance Division, various). Priority: Medium/Low. - Increase use of e-procurement and monitoring/reporting on procurement (Public Procurement Regulatory Authority, Dec 2024). Priority: Medium. - Climate-Sensitive Public Investment - Identify sectoral contributions to climate mitigation and adaptation targets and prepare costed investment plans; publish the handbook on incorporating climate resilience in sectoral planning and project preparation (Planning Commission, 2023). Priority: Medium/High. - Finalize Climate Change Resilient Urban Human Settlement Strategy; add climate-resilience and mitigation measures in building codes/urban planning guidelines (MoCC, 2023). Priority: High. - Develop guidance on climate-sensitive appraisal inputs (e.g., discount rate, shadow pricing standards, valuation of GHG emissions & climate impacts) (Planning Commission, Dec 2024). Priority: Medium. - Implement green budgeting, a green budget statement, and long-term fiscal sustainability analysis considering climate scenarios (Finance Division, from mid-2023). Priority: Medium. - Develop and publish PSDP project selection criteria that incorporate climate change criteria (Planning Commission and NEC, Dec 2024). Priority: High. - Identify and document infrastructure assets in key sectors exposed to climate-related natural disaster risks (National Disaster Management Authority, 2024). Priority: Medium. - Train staff to strengthen capacity of key agencies to oversee and coordinate investment projects for climate goals (Various). Priority: High. *An Action Plan is at Annex 1; detailed recommendations appear in relevant sections, chapters, and Annex I.* *Source: IMF Technical Report — Executive Summary (1pakea2023002).* ### 3. Public capital stock in Pakistan stood at 55 percent of GDP (2019) after three decades ### 3. Public capital stock in Pakistan stood at 55 percent of GDP (2019) after three decades ### Public investment trends and implications - Public investment budget has been procyclical, and PPP investments have inversely mirrored the trend. - Annual investment flow dropped from nearly 6 percent of nominal GDP in 1992 to less than 2 percent in 2000. - Nearly two decades were characterized by substantial swings between 4.5-2.5 percent investment flow annually, with marked peaks in 2007 and 2017. - Large year-to-year variations make it difficult to plan and execute large infrastructure investments, increasing risks of: - incomplete projects, - large cost overruns, - premature asset deterioration. ### Nominal public investment and share of GDP - In nominal terms: - Increase from 2016-17 to 2017-18 of around Rs. 500 billion to around Rs. 2,000 billion, which held steady in 2018-19. - Gradual decline in 2019-20 and 2020-21 left the investment budget at around Rs. 1,700 billion. - Followed by a strong ramp up to nearly Rs. 2,400 billion. - As a percentage of GDP, trend defined by a downward movement: - High of 5.28 percent in 2017-18 to 3.55 percent in 2021-22. ### Public capital stock levels and peer comparisons - Pakistan’s stock of infrastructure declined markedly in the 1990s and mid-2000s, but recovered to around the 1995-1999 level by 2019 at 3.8 percent of GDP. - Gap to emerging market peers (as percent of GDP) varied: - Widened from 1990-2004, - Narrowed between 2005-2009, - Reversed in 2010-2014, - Narrowed in 2015-19 to around 2.2 percent of GDP. - In 2019: - Pakistan’s capital stock was 54.9 percent of GDP (PPP adjusted), sixth largest of the selected eight peers (Peers 1: Bangladesh, Egypt, Iran, India, Indonesia, Morocco, and Turkey). - Capital stock per capita was USD 1,900 per capita, placing Pakistan last in the peer group, a little behind Bangladesh. - The per capita shortfall reflects Pakistan’s high birthrate and slower GDP growth compared to most peers. - GDP per capita context: - Pakistan’s GDP per capita is broadly comparable with India and not too far from Morocco (Figure 1.5 reference). ### Government debt and capital stock value - General government debt has been climbing since the mid-2010s. - Growth in government debt has not been matched by similar growth in the value of capital stock. ### Composition and execution of public investment - Since Amendment 18 of the Constitution in 2011, provincial governments’ share of public investment execution has increased. - Capital investment executed at subnational level averaged 60 percent of total capital spending in the last six years. - At the federal level, capital spending is executed by line ministries and autonomous/semi-autonomous agencies (National Highway Authority, Water and Power Development Authority, Airport Authority, Ports Authority), which together executed approximately one-fifth of capital spending in recent years—comparable to line ministries. - Sectoral allocation differences (2021-22 PSDP): - Provinces: nearly three quarters of provincial PSDP budgets devoted to education and health. - Federal: a little over half of the PSDP spent on economic infrastructure (energy, transport, water, other economic); the remainder on social infrastructure (education, health, other social). - Financing sources (2021-22): - Three-quarters of public sector investment was budget funded. - Additional 15 percent financed through external sources, primarily from development partners with a domestic component. - Remainder comprised investment made by autonomous entities from their own resources. - Around 40 percent of autonomous entities’ capital investment was still financed through the PSDP in 2021-22. ### Public-Private Partnerships (PPPs) - Pakistan accumulated a large stock of PPPs since the early 1990s; PPP deal flow has been volatile with sharper peaks and troughs than peers. - In broad terms, yearly PPP value is inverse to ordinary budget-funded investment, with peaks in the late 1990s, around 2010, and a steep upward trajectory in the late 2010s. - Pakistan’s PPP stock is comparable to India as a share of GDP and ahead of Indonesia, Egypt, Bangladesh, and Iran. - From 1990 to 2019: - 108 infrastructure-based PPP contracts achieved financial closure with an approximate USD 28.4 billion (2019 dollars) deal value. - Sector distribution: - Energy: 94 deals, 87 percent of total portfolio size. - Ports: 9 deals, 11 percent of total portfolio size. - Remaining 5 deals (4 percent) covering ICT, airports, waste disposal and more recently roads. - Energy projects mainly take-or-pay, availability payment type contracts; 33 contracts have credit enhancement in the form of sovereign guarantees. ### Efficiency of public investment - PIMA efficiency assessment compares capital stock per capita to outputs and outcomes; countries achieving highest access and quality define the efficiency frontier. - Infrastructure access measures (Table 2.1 comparisons): - Public education infrastructure (Secondary teachers per 1000 people): Pakistan 1.8 (1990s) to 3.3 (Most Recent Year) vs Peers 1: 3.5 to 5.1. - Electricity production per capita (kWh per 1000 people): Pakistan 0.4 (1990s) to 0.7 (Most Recent Year) vs Peers 1: 0.7 to 1.9. - Public health infrastructure (Hospital beds per 1000 people): Pakistan 0.6 (1990s) to 0.6 (Most Recent Year) vs Peers 1: 1.3 to 1.3. - People using at least basic drinking water services: Pakistan - to 90% (Most Recent Year) vs Peers 1 - to 95% (Most Recent Year). - Perceived quality of infrastructure has improved over the years and the perception gap with peers has narrowed (2018 World Economic Forum Global Competitiveness rankings cited for specific sub-indicators). - Hybrid public investment efficiency gap in Pakistan is estimated at around 38 percent, indicating considerable potential to improve access and quality given existing capital stock per capita. - Pakistan’s efficiency gap is slightly larger than the mean in the peer group and larger than averages for Emerging Economies, MENAP, and all countries groups. - The gap signals underutilization of capital investment spending to provide optimal access and quality of public services and infrastructure. ### Public Investment Management Assessment (PIMA) findings - PIMA framework evaluates 15 institutions across three stages of the public investment cycle: planning, allocation, and implementation. - Each institution is analyzed on institutional design, effectiveness, and reform priority. - Overall PIMA assessment for Pakistan: - Scores higher in the implementation phase than in allocation and planning phases. - Three out of fifteen institutions score high on institutional design (including fiscal targets and rules, availability of funding, management of project implementation). - Ten institutions score medium on institutional design; two are low (planning and budget comprehensiveness). - On effectiveness, only project implementation scores high; four are low (fiscal targets and rules, planning, maintenance and monitoring public assets). - Pakistan scores more highly for design than effectiveness overall. - In two institutions (coordination and budget comprehensiveness and unity) effectiveness exceeds design. - Recent reforms in the 2021 Manual for Development Projects are not yet fully implemented and thus not fully reflected in effectiveness scores. - Assessment focuses on Federal Government; interactions with provinces are examined but in-depth provincial practices are not part of the federal PIMA. - Pakistan’s scores are slightly stronger than the average of emerging market peers, particularly for institutional design. ### Investment planning – Fiscal targets and rules (PIMA institution) - Fiscal rules and a credible medium-term fiscal framework (MTFF) help ensure fiscal sustainability and align planning, budgeting and funding for public investment. - Pakistan’s Fiscal Responsibility and Debt Limitation Act (FRDLA) contains essential elements to guide medium-term fiscal policy and applies to the SOE sector. - Public Financial Management Act (section 7A) requires the Finance Division to prepare a draft MTFF in October each year. - MTFF process: - MTFF forecasts macro-fiscal aggregates and determines the resource envelope for the next three years. - Finance Division issues indicative budget ceilings (multi-annual for current spending but only for one year for the PSDP). - After budget deliberations (February–April), Finance Division updates final MTFF, published in the Medium-Term Budget Strategy Paper in April and the Annual Budget Statements in June. - 2022 Amendment to the FDRLA requires the MTFF to include projections for provinces and special areas, in addition to the federal government, and be published in their respective budget documents. *Source: IMF Staff technical report content (chapter/section provided).* ### Box 3.1 Fiscal rules in Pakistan ### Box 3.1 Fiscal rules in Pakistan ### Legal framework and key numeric limits - The Fiscal Responsibility and Debt Limitation Act (2005) sets a ceiling on total public debt at 60 percent of GDP. - The 2016 Amendment added an operational limit to the debt ceiling: "the annual federal deficit (excluding grants) was not to exceed 4 percent of GDP over the period FY2018 to FY2021, and 3.5 percent of GDP thereafter." - The 2016 Amendment "required measures to be taken to reduce debt below the 60 percent ceiling within two years and set a path for further reduction up to 2033." - A 2022 Amendment limits the stock of guarantees taken by the Federal government to 10 percent of GDP. - At the provincial level, Amendment 18 to the Constitution allows provinces to borrow domestically and internationally subject to conditions set by the National Economic Council. - Footnote: "Before 2017, debt is defined as the sum of debt of Federal and Provincial Governments serviced out of the Consolidated Fund, plus debt owed to the IMF." ### Observed outcomes and fiscal performance - "The debt and deficit ceilings under this framework have been ineffective at containing expenditure and the debt limit has been consistently breached over the years." - "Total public debt has trended upwards since 2010, consistently exceeding the 60 percent ceiling after 2012." - Provincial fiscal performance: "Their aggregated fiscal surpluses averaged 0.4 percent of GDP over the period FY2016 to FY2022." - Budget execution patterns: - Deviations between initial MTFF and finalized budget are "largely due to changes in the recurrent budget." - "In recent years, budget priorities have set higher spending levels, hence higher fiscal deficits, but this has largely been confined to the recurrent side of the budget." - "Generally, the PSDP budget does not depart markedly from the envelope envisaged in the October MTFF." ### Drivers of noncompliance and ongoing reforms - Many factors explain noncompliance; public financial management (PFM) reforms can instill stronger fiscal discipline. - Ongoing reforms advancing well: - Efforts to strengthen the budget process and increase transparency. - New mechanisms to coordinate cash and debt management. - Implementation of commitment controls. - Reforms at an early stage: - Improving the quality of expenditure allocation in the budget process. - Central oversight of state-owned enterprises (SOEs). - Tightening procedures behind the use of supplementary grants. ### Implications for policy and oversight - The combination of a breached debt ceiling and recurrent-budget-driven deficits implies stronger PFM instruments are needed to enforce the statutory limits. - The 2022 guarantee limit (10 percent of GDP) and creation of a Debt Management Office are measures to limit contingent liabilities and strengthen monitoring of guarantees. - Provincial borrowing powers (Amendment 18) and the differing fiscal positions of federal and provincial governments point to the need for coordinated debt and contingent-liability oversight across levels of government. *Source: Fiscal Responsibility and Debt Limitation Act (2005) as amended.* ### 39. The appraisal framework is operational, but achieving the full potential in terms of ### 1pakea2023002 - 39. The appraisal framework is operational, but achieving the full potential in terms of ### Appraisal framework: status and operational issues - The new Manual for Development Projects was released at the end of 2021 but is yet to be fully implemented. - Systematic scrutiny of PC-Is exists and projects are sent back for revision as documented in the iPAS system. - Large projects undergo feasibility studies and receive dedicated funding: - Funding in the 2022-23 budget was allocated for 47 feasibility studies ranging from Rs. 5 million to Rs. 500 million. - About two thirds of these feasibility studies cost less than Rs. 150 million. - Due to data quality issues in iPAS, it is difficult to establish what proportion of projects the 47 feasibility studies correspond to, though available data suggests the large majority of major projects are subject to rigorous technical, economic, and financial analysis. - Key assumptions for some calculations (for example by implementing agencies such as the National Highway Authority) are developed by the implementing agency, which can make cross-sectoral scrutiny and comparison difficult. - Samples of feasibility studies and cost benefit analysis done for PC-Is and PC-IIs were not provided or otherwise publicly available. - The Planning Commission considers appraisals are conducted with a high degree of independence and professionalism. ### Strengthening the appraisal framework: needed initiatives - The new process requires substantial technical capacity across sponsoring agencies and central ministries that will take time to build. - Specific gaps and concerns: - More focus is needed on developing guidance, timelines, procedures, and capacity to ensure impact from “core” mega projects; the term “core” does not appear in the 2022-23 Public Sector Development Program. - The low threshold for undertaking feasibility studies (PC-II) of 500 million raises concern whether resources are spread too thinly or are proportional to project size. - Central guidance is needed on foundational inputs—choosing the appropriate discount rate, shadow pricing standards, and similar items—to ensure comparability across projects in selection. ### Alternative infrastructure financing: landscape and institutional arrangements - Multiple channels exist for infrastructure provision: government budget, private sector financing and delivery, and a competitive landscape for network infrastructure. - Market openness and regulation: - Major infrastructure sectors have been deregulated; investment and promotion policies opened all economic sectors to foreign investment with equal treatment. - Power Policies allowed private independent power producer participation; the deregulation policy in 2003 and Mobile Cellular and Broadband Policies established competition in telecom. - Regulators are well established in power, air transport, and communication sectors (National Electric Power Regulatory Authority, Civil Aviation Authority, Pakistan Telecommunication Authority). - PPP framework and SOE monitoring: - The PPP framework is fragmented and lacks a holistic strategy and key complementary regulation despite recent legal and institutional strengthening. - Recent legislation (Act No VII of 2023) established a centralized monitoring framework to review investment plans and monitor financial and operational performance of SOEs: - Establishes institutional arrangements, management principles, systematic performance reporting, and development of SOEs 3-year business plans. - A Central Monitoring Unit in the Finance Division will monitor the performance of the 85 federal commercial SOEs and support development of a five-year ownership and management policy. - P3A has both promotion and evaluation roles; further federal policy, regulation, and guidelines for implementing the PPP system are under review or development by the PPP Authority. ### Practical outcomes, risks, and fiscal implications - Private investment participation: - Private investment is mostly present in telecom, power generation and some transport segments. - Private mobile operators hold the 99 percent of market share. - By January 2023, there were 45 commissioned independent power producers (mostly thermal power plants) and one commissioned transmission line project. - Four of 46 airports are private, and Pakistan International Airline carries most passenger and freight traffic (87 percent). - PPP outcomes and contingent liabilities: - Multiple power generation projects have been developed based on Power Purchase Agreements; some led to significant public liabilities. - No other PPP contingent liabilities have been fully accounted for and the methodology to guide valuation is not yet in place. - The 2022-23 development program includes appropriations of Rs. 73 billion (~USD 240 million). - P3A has identified a portfolio of 47 projects, mainly in transport and communication. - Annual debt servicing costs related to power sector contractual obligations have been noted as exceeding Rs. 100 billion. - Three more transport sector projects have been approved, completing a total of $3.2 billion authorized by the board of P3A. - Capacity and oversight gaps: - Building sufficient federal and provincial level capacity to manage the complexity and risks of PPPs is a challenge. - Government does not systematically review the investment plans of SOEs; Finance Division reports outline financial performance albeit with delays. - Power Division produces an annual consolidated performance report covering 22 public sector companies including power distribution companies; energy SOE investment plans are reviewed by the regulator. ### Recommendations on the Planning Phase (with lead agency, timeframe, and priority) - Issue 1: Lack of a comprehensive medium-term planning document. - Recommendation 1: Develop a new five-year strategy identifying major projects across all sectors and funding sources to guide development of sectoral investment plans (Productivity Commission, by December 2024). Priority High - Issue 2: Appraisal process can be further strengthened; larger projects need greater scrutiny. - Recommendation 2.1: Review processes for core projects to ensure appropriate focus on very large projects, regardless of funding source. (Planning Commission, December 2023) Priority Medium - Recommendation 2.2: Continue plans to obtain independent scrutiny of major project proposals, including around cost estimation and increase transparency of project appraisal documents. (Planning Commission, December 2024) Priority Low - Recommendation 2.3: Develop more specific guidance with respect to key appraisal issues such as choosing the appropriate discount rate, shadow pricing standards and similar foundational inputs to ensure comparability across projects in the appraisal and selection stage. (Planning Commission, December 2024) Priority Medium - Issue 3: Public investments not well coordinated or comprehensively presented across funding sources. - Recommendation 3.1: Formalize processes to obtain information on investment projects funded from sources other than the PSDP and present aggregate information on the public sector investment program in the budget and/or expanded PSDP, showing major federal projects and their expected costs regardless of financing source. (Planning Commission and Finance Division, June 2024) Priority High - Recommendation 3.2: Enhance central scrutiny, reporting and transparency to ensure that all investment projects by autonomous entities are undertaken in a sustainable manner. (Planning Commission, June 2024) Priority High - Recommendation 3.3: Implement the central monitoring system for SOEs and establish guidance for oversight/information exchange on SOE investment plans. (Finance Division, June 2024) Priority High - Issue 4: Fragmented and incomplete PPP oversight frameworks and fiscal risk management. - Recommendation 4.1: Update and complement the regulatory framework and appraisal methodologies for PPPs across sectors and level of governments. (P3A, June 2024) Priority Medium - Recommendation 4.2: Develop a register of PPPs and initiate periodic reporting to Finance on contingent liabilities of PPPs across all sectors. (Finance Division, September 2024) Priority High - Issue 5: Scope to improve competition in some economic infrastructure markets and to advance SOE reform. - Recommendation 5: Reinvigorate action to implement the SOE Triage report prepared in 2021 on the privatization and restructuring program for SOEs. (A task group coordinated by Finance Division with participation of relevant line ministries and commissions, and supported by the new central monitoring, by June 2025) Priority Medium ### Investment allocation: multi-year budgeting - Multi-year budgeting provides forward visibility for ministries, departments and agencies and helps manage lumpy, volatile capital expenditure for major public investment projects. - Current practice and gaps: - The medium-term budget strategy paper includes three-year projections for the PSDP, including the total cost of all projects, but no multi-year ceiling is set at the levels of ministries or sectors. - The projections in the medium-term budget strategy paper released with the budget in June each year cover four broad categories (infrastructure, social, science and IT, and regional development) but not by ministry or specific sectors; they do not constitute multi-year ceilings. - While the Finance Division sets multi-year indicative budget ceilings for line ministries, they are limited to the current budget. - The Planning Commission only sets annual ceilings for the PSDP for line ministries. - The PSDP reports the total cost for projects benefiting from federal or external funds, but there is no annual breakdown of this cost over the medium term. *IMF | Technical Report* ### Box 3.4 Identifying Capital Spending in the PSDP ### Box 3.4 Identifying Capital Spending in the PSDP ### Definition and scope of PSDP spending - PSDP budgets encompass investment in physical (infrastructure and equipment) and in human capital. - PSDPs cover acquisition of physical assets with a multi-year life span and also spending on training, curriculum design, and one-off foreign scholarships (typically in the education sector). - PSDPs cover spending on general capacity building across the public sector. - Flagship poverty reduction programs, such as the Ehsaas Program and the Benazir Income Support Program, are reported in the current budget (not the PSDP). - An analysis of the PSDP for FY2023 finds that the sum of projects that would need reclassification as current spending under a recurrent-capital budget nomenclature is small. ### Execution, cost reporting, and multiyear planning - Execution of PSDP budgets has been weak and has called into question the realism of both PSDP budgets and multi-year projections; significant under execution is systematic across Federal and provincial governments. - Successive PSDPs update total cost estimates of ongoing projects, but changes are not reported or explained in either the PSDP or the annual development plan. - In the absence of multiyear ceilings, line ministries lack visibility over future capital resources, which can discourage medium-term planning and efficient prioritization. - At the Federal level, absence of multi-year ceilings may contribute to high-value new project proposals despite tight fiscal space. - Commitments are recorded annually but not as multiyear commitments per the Accounting Policies and Procedures Manual (APPM 1999) and Guidelines for Commitment Control (2022); there is no mechanism to protect ongoing projects over the medium term. - The Planning Commission’s PC-I form shows planned project costs by year and classifies funding requests as new or supporting ongoing projects; the Planning Commission has an informal policy of allocating annually 80 to 90 percent of available domestic development funding to ongoing projects. - Effectiveness is modest: commitments are not recorded as required and project completion is often delayed due to lack of funding. ### Cost overruns and project cost information - Auditor General of Pakistan (AGP) audits have identified instances where large cost overruns were identified only ex post; example: Golen Gol Hydropower Project final cost Rs. 30 billion versus initial estimate Rs. 7 billion. - The IT system used by the Planning Commission updates total cost information, but reporting evolution of total costs could enhance scrutiny during implementation. ### Comprehensiveness and extra-budgetary entities - Current and development budgets are prepared by separate ministries (Finance Division prepares current budget; Planning Commission prepares development budget) and consolidated for Parliament. - Legal and regulatory framework does not restrict creation of autonomous and semi-autonomous entities that operate outside the budget; there is a high number of these entities and their capital spending is significant. - Capital spending by extrabudgetary entities is included in the PSDP only if examined and approved by the Departmental Working Group and if: (i) funded fully or partly from domestic revenue or external sources; or (ii) self-funded but with a foreign exchange component above 20 percent of total value. - An analysis for FY2021-22 shows capital spending by these entities not included in the PSDP represented around 60 percent of their total capital spending. The bulk is in telecommunication, transportation, port, and airport sectors. - Capital spending by National Highways Authority, Water and Power Development Authority and Pakistan Railways is typically included in the PSDP as they are typically budget funded. - The Pakistan Bureau of Statistics reports on Gross Domestic Fixed Capital Formation, but its definition differs from the PSDP, complicating understanding of the investment footprint of autonomous entities. - The Planning Commission is attempting to gather more information from ministries via the Development Budget Call Circular for FY2023-24. ### Funding needs, throw-forward, and time to completion - The Planning Commission indicates the throw-forward (amount needed to complete ongoing projects) is Rs. 10.729 trillion; another authoritative figure for total cost of ongoing new and ongoing projects is Rs.10.222.4 (mission not able to reconcile difference). - Table 3.1 (2022-23 PSDP Cost and Time to Completion): - New projects: No. of projects 244; Total cost Rs. billion 2,261.9 - Funded ongoing projects: No. of projects 909; Total cost Rs. billion 7,961.5 - Total funding provided for 2022-23: 727.5 - Average years to completion (assuming current development budget funding and no new projects): 14.1 - If annual PSDP budget remains the same and no new projects are added, it will take approximately 14 years to complete existing approved projects; in practice new projects continue to be added. - The Planning Commission estimates a typical project requires 2-3 times its original estimated cost due to inflation, damage to work already done and loss of materials at inactive sites, and increased builder costs—largely attributed to funding-induced delays. ### Maintenance funding and asset preservation - Routine and capital maintenance needs do not systematically follow standard methodologies (except for roads and economic infrastructure in regulated sectors), though maintenance is identified in the budget. - PFM Act requires entities to include in demands for grants “adequate funds for maintenance of the physical infrastructure assets under its supervision” and requires the Planning Commission to “define adequacy requirements for different categories of physical infrastructure to be expressed as the ratio of the annual provision for maintenance and the current market value of the assets”. - National Highways Authority uses a Road Asset Management System to prepare network-level maintenance plans. - In practice maintenance funding is considered inadequate: - Low expenses for repair and maintenance are reflected in federal government financial statements: 0.2 percent of long-term assets. - For roads, the funding gap has increased from 27 percent in 2010-11 to 86 percent in 2019-20 (excess of needs over allocations). - The 2022-23 budget performance target for road maintenance is 10,700 km, covering just 2 percent of Pakistan road network. - Pakistan road network is approximately 500,000 Km and National Highway Authority Network 13,570 Km. - Maintenance expenses of infrastructure assets covered by authorities and other SOEs are not captured in federal finances (e.g., roads covered by National Highways Authority maintenance fund or public airports funded by the Aviation Authority). - Finance Division plans to develop a standardized methodology for estimating routine maintenance needs by asset type for implementation by the Productivity Commission to improve maintenance planning and budget allocation. ### Project selection and appraisal - Project selection is separate from planning and appraisal; selection should choose projects from a pool of appraised projects with consideration of economic, social, environmental, and other objectives. - All major projects are reviewed centrally to form a pipeline of appraised projects; projects must be appraised before inclusion in the PSDP as stated in the PFM Act. - There are no published selection criteria to guide funding decisions and independent review is not required. - The Manual on Development Projects requires project selection for funding in the PSDP; each ministry’s proposals are reviewed by CDWP, Annual Planning Coordinating Committee, and the NEC. - Independent agencies or experts are not required in the selection process, though they may be used in appraisal. - Guidance on development budget preparation provides minimal guidance on priorities (e.g., giving priority to projects under regional equalization programs); comprehensive and clearly delineated selection criteria have not been formulated and published. ### Policy and process implications (implied reforms and priorities noted in text) - Improve reporting and explanation of changes in total project costs across PSDP and annual development plans to enhance scrutiny during implementation. - Introduce multiyear ceilings or mechanisms to provide line ministries visibility over future capital resources to support medium-term planning and prioritization. - Record multiyear commitments in the accounting system in accordance with APPM and the Guidelines for Commitment Control (2022) to protect ongoing projects over the medium term. - Strengthen coverage and reporting of capital spending by autonomous and semi-autonomous entities to present Parliament with a comprehensive picture of public sector investment. - Compare PSDP project total costs with realistic medium-term funding availability to provide a more credible basis for the PSDP budget and address the large throw-forward. - Develop and implement standardized methodologies for estimating routine and capital maintenance needs by asset type to better preserve asset value and align maintenance funding with needs. - Formulate and publish comprehensive selection criteria and consider independent review to improve transparency and consistency in project selection. *Source: IMF staff (Box 3.4, Identifying Capital Spending in the PSDP).* ### 64. All major projects are subject to the prescribed selection process, but requesting projects ### 1pakea2023002 - 64. All major projects are subject to the prescribed selection process, but requesting projects ### Selection process and allocative efficiency - All PSDP projects go through the prescribed selection process; decisions are documented by the reviewing fora. - Projects can be suggested for inclusion in the PSDP by Cabinet and the National Assembly late in the process for finalizing the PSDP. These projects still must be appraised to be included, but appraisals and the selection process can be rushed and subject to political pressure (even if implicit). - The effective pipeline of projects are those that have been appraised before the budget allocation process begins in April each year. - There is little guidance on how to choose projects to receive limited funding in the PSDP beyond project rate of return; other relevant considerations include regional distribution, environmental impact, risk, obligations under international and provincial agreements, foreign currency impacts, and current government priorities. - Selection should consider complementarity of new and ongoing projects and broader political, economic, and social conditions beyond the technical characteristics on the PC-I form. - Subjective considerations, applied inconsistently, can distort selection decisions; objectivity and allocative efficiency would be enhanced by published, consistently applied selection criteria. ### Tools and examples for selection - Scoring tables recommended: - Step 1: Identify factors (examples: economic impact, balanced regional development, current public policy priority, environmental impact). - Step 2: Score factors on a common yardstick (eg. 1 to 10). - Step 3: Sum scores to enable ranking of projects. - South Korea cited as a good example of using scoring tables to select projects. ### Recommendations on allocation phase (explicit) - Recommendation 6: Develop and publish criteria for selecting projects to receive funding in the PSDP. This should be developed by the Planning Commission, reviewed by the various fora up to the NEC, and concluded by December 2024 to guide preparation of the 2025-26 PSDP. Priority High. - Recommendation 7: Conduct a one-time review of all technically approved projects and reduce the set of active projects to high priority projects that can be completed in a timely manner. This should be carried out by the Planning Commission and reviewed by the various fora up to the NEC. It should be completed by the end of 2024, in time for the 2025-26 PSDP. Priority High. - Recommendation 8.1: Set multi-year indicative budget ceilings by ministry. (Planning Commission and Finance Division Jun 2024). Priority Medium. - Recommendation 8.2: Examine scope to reduce the within year adjustment of capital expenditure (including restricting the ability to add new projects through supplementary grants or virements). (Finance Division, Dec 2023). Priority High. ### Stock of ongoing projects and triage - A large stock of technically approved and ongoing projects compared to available funding causes delays in completing projects and increases costs. - The Planning Commission estimates that projects are delayed, and costs increase, by 2 to 3 times the original plan. - Undertaking a triage of existing projects across all funding sources to remove low priority projects would support planning future delivery and potentially create space for new high priority projects (eg. flood recovery and climate change). ### Procurement (Institutional strengths and gaps) - Strength—Medium; Effectiveness—Medium; Reform Priority—Low. - Legal framework: - Public Procurement Rule 2004 prescribes open competition (Rule 20) and mandatory consideration for transparency (Rule 4). - Procuring agencies must publish the final evaluation report fifteen days prior to award of the contract (Rule 35). - Independent complaint review forum exists; appeals to the public procurement regulatory authority under Rule 48; the authority’s decision on complaints is final under the rule. - Practical observations: - Almost all procurement opportunities (over Rs. 3 million) are advertised publicly in a newspaper of wide circulation and on the PPRA website; award information is disclosed prior to award. - Recent amendments permit award to SOEs without competition when projects are time sensitive and in the public interest; use is limited but poses risk to private sector competition. - Procurements for public investment projects are annually reviewed by the Auditor General of Pakistan. - Procuring entities submit information on contracts over Rs. 50 million under Section 33-B of National Accountability Ordinance to the National Accountability Bureau. - PPRA does preliminary review of advertisements and reviews complaints; the Competition Commission of Pakistan can detect and prosecute collusive bidding. - Monitoring and data gaps: - No structured procurement database with analytical capability exists to evaluate data from different sources and detect deviations from standards. - Procurement information is fragmented: advertisements, evaluation reports, contract award disclosures on PPRA website, and audit observations. - Provincial reports cited: Balochistan PPRA 2019-2020 and Punjab PPRA 2017-2018 indicate considerable noncompliance; Balochistan 2019-2020 monitoring shows 52 percent compliance with maximum violations in forming clear and unambiguous evaluation criteria (60 percent of total violations). - Complaint system issues: - Average time to resolve complaints is between two to six months. - Decisions on procurement complaints by the PPRA are not published. - A significant fee applies for appeals to the authority, reducing effectiveness. - PPRA decisions are final but not rigorously enforced; recommendations are typically made for enforcement. - No data on number of complaints pursued in court after PPRA review or percentage of decisions reversed by courts. ### Procurement reform directions - Plans to launch e-Procurement systems in federal and provincial governments that would serve as databases for procurement with varying analytical capabilities. - A procurement database with analytical capability and standard reports could improve procurement governance and decision making. - Capacity of PPRA could be enhanced to more effectively monitor procurement and act as an independent forum. ### Availability of funding (cash management) - Strength—High; Effectiveness—Medium; Reform Priority—Medium. - Cash-flow forecasting and release practices: - Cash-flow forecasts prepared monthly; Cash Management Working Group began producing forecasts in early 2023 consisting of a monthly forecast looking one month ahead. - Forecasts are used primarily to determine if quarterly spending releases are financially sustainable. - Finance Division issues two release strategy documents at the beginning of each fiscal year: one for the current budget and one for the development budget. - For the development budget, the release strategy indicates a percent of each ministry’s approved annual budget that can be spent in each of the four quarters of the fiscal year. The percentage applies equally to all ministries, and thus does not reflect ministry-specific timing of spending. - Release strategies typically are not revised in-year; the executive can adjust through the Supplementary Grant procedure. - Externally funded project accounts are located in the treasury single account in the central bank per a Finance Division circular. - Practical misalignment and consequences: - Misalignment between cash needs for project expenses and cash releases slows project delivery and leads to inefficiencies. - Ministries are informed of releases in advance and cash is provided consistent with announced releases, but release amounts are not based on financing expenditures when needed during the year (which requires reliable commitment information). - Expenditures must be adjusted to conform to cash releases; contractors are informed of limited release amounts and expected to adjust work performed accordingly. - Short-term borrowing is not conducted by the federal government to align seasonal release availability with contract construction calendars. - Finance Division has timely information on balances of externally funded project accounts (raising effectiveness to medium). - Impact on project implementation: - These arrangements are a substantial cause of delays in implementation and late payments to contractors. - Example: Development Budget Release Strategy for 2022-23 announced releases at 10, 20, 30 and 40 percent for each quarter, respectively. Expenses incurred by a contractor above available funding typically are not billed in that quarter; contractors absorbing temporary cost may try to recover in future periods. Delays in payment are not recorded as arrears due to lack of legal deadlines for invoice payment. ### Portfolio management and oversight - Strength—Medium; Effectiveness—Medium; Reform Priority—Medium. - Portfolio management purpose: - Supports efficiency in public investment, helps determine if projects are on time and within budget, identifies risks needing high-level intervention, and optimizes fund assignment to best performing projects. - Legal and procedural framework in Pakistan: - PFM Act requires monitoring and evaluation of all development projects. - Project management rules in the Manual for Development Projects 2021 require systematic in-year progress reporting for all capital projects, including physical and cost progress and bottlenecks (PC-III proforma by PMES). - Monitoring involves different stakeholders and sets the framework for course corrections, reallocation opportunities, and ensuring on-time and within-budget completion. - Planning Commission should monitor selective projects (around 25 percent of development projects) and present an Annual External and Mid Term Monitoring/Review of core projects to the ECNEC. - PFM Act allows reallocation of funds between investment projects before the last month of the fiscal year. Clear rules for re-allocation (eg. limits on amount/share that can be reallocated) are not in place. - Ex-post review required after completion (PC-IV proforma); for core projects an independent impact assessment should be completed five years after completion (PC-V proforma). *IMF | Technical Report* ### 76. Most projects present cost overruns and delays which are systematically reported; ### 1pakea2023002 - 76. Most projects present cost overruns and delays which are systematically reported; ### Cost overruns, delays, and reallocation practices - Most projects present cost overruns and delays which are systematically reported; reallocation is a common practice without evident impact in budget execution; few projects complete ex--post reviews. - Monitoring reports are collected systematically, allowing for capture of comprehensive data on cost overruns and delays. - Reported examples had over 50 percent overrun costs, with the principal cause attributed to budget allocations below project plans. - In 2022 the Planning Commission recommended adjustments in the PSDP due to the 39 percent reduction in the budget; the projects targeted for completion were reduced from 320 to only 170. - In practice, reallocations are permitted after the second quarter to transfer budget from slow moving projects to fast moving projects. - Aggregate execution of development expenses remains modest: 71 percent on average over the last 5 years. - Ex-post reviews for major capital projects are submitted infrequently, limited in practice to a few major projects. ### Monitoring and portfolio management gaps - Multi-term reporting (monthly, quarterly, and annual reviews by the diverse actors) is required at project or sector/cluster level. - The monitoring process involves internal (Project Director, Principal Accounting Officer) and external parties (Consultants, Member implementation and Monitoring of PC, DCPC, other relevant stakeholders). - Officials consistently indicated that most projects are subject to significant price increases and interruptions, but no analyses were available related to portfolio management actions based on the structural cost overruns and delays. - The aggregate impact of reallocations is not clear, though individual cases emphasized the relevance of reallocation of funds for the completion of projects. - The strength of portfolio monitoring would be further enhanced by using data in monitoring systems for analysis and strategic portfolio management. - Analyzing recurrent information on project execution to determine portfolio level trends and summarize the status of the portfolio could be an important component of the Annual External and Mid Term Monitoring/Review of core projects. - Stronger and more active portfolio management and oversight across projects would allow for sharing of common challenges, inform better decision-making on new projects and project implementation, and ultimately enhance the effectiveness of investment spending. - Enforcement, support, and capacity building related to ex-post reviews of major development projects would facilitate greater efficiency of public investment spending. ### Design and implementation arrangements for projects - The design of project implementation is strong in Pakistan, involving: implementation plans, processes for monitoring and for major project adjustments, and ex post external auditing. - According to the Manual for Development Projects, the ‘Project Director User’ has responsibility for entering the project’s financial and physical progress into the PMES System. - Sponsoring agencies are required to appoint a project director at the initial stage of projects. - For major projects approved by the NEC and ECNEC, independent project directors should be appointed. - Selection and appointment of project directors are regulated through a Selection and Appointment Committee and appointment process. - Work and cash flows should be provided with the project proposal, as well as management structure and staffing requirements, and risk assessments are required as part of feasibility studies for major or infrastructure projects. - Project management rules consider potential adjustments (scope, timeline, and cost) and establish criteria and procedures. - For cost overruns larger than 15 percent, the project should follow the whole appraisal and approval process to be adjusted. - The Auditor General has the legal mandate for external ex-post audit of projects. - Implementation practices observed: - Implementation plans are provided before project approvals. - Project adjustments are scrutinized. - Performance audits are regularly conducted by the Auditor General. - Evidence gaps and implementation shortfalls: - Not clear that all major projects’ proposals appropriately included key arrangements for adequate management and monitoring during implementation (e.g., major milestones and target dates, key staff, and risks). - For mega projects above Rs. 3 billion and foreign financed, an independent project director is required to start soon after concept clearance. - To adjust scope by more than 15 percent of initial estimated cost, the whole appraisal and approval process must be followed again. - The Auditor General of Pakistan undertakes performance audits of major capital projects according to annual audit plans; in 2021-22, 14 performance audits were carried out relating to major infrastructure projects. - Audits are reported to Parliament, but are often considered by the relevant Parliamentary Committee with a lag. - The Auditor General’s Office provided examples of how audit recommendations are having an impact. - Unavailability of funding hampers project implementation; many challenges relate to systematic granting of budget allocations below what is consistent with original project delivery plans. ### Monitoring of public assets - Asset registers are required for all federal ministries that own or control fixed assets costing a minimum of Rs. 100,000 at historical cost and are to be updated regularly as new asset purchases are made. - The federal government is not required to consolidate the data, and ministries are not required to ensure general access to registers maintained by them. - Financial statements include non-financial asset information as memoranda only and without revaluation; depreciation of fixed assets is not recorded. - The Accountant General adopted the New Accounting Model in 2000 which aimed to include fixed assets and depreciation in the annual financial statement; the portion relating to Physical and Financial Assets Accounting has not been implemented. - Expenditures on various types of fixed assets are recorded using the economic (object) classification of the chart of accounts, with specific asset purchased noted in the general ledger; the cost of fixed assets is included in the annual financial statements but only as a memorandum item. - IPSAS cash standards are followed and require disclosure of annual expenditures on assets in a memorandum to financial statements; memoranda are not audited by the Auditor General. - Some ministries have effective asset registers used for operational purposes, but registers are not readily accessible or consolidated centrally. - The National Highways Authority has developed asset registers and processes; it annually updates asset values using replacement costs to estimate maintenance costs and benefits. - The 2023-24 Budget Call Circular requests data on fixed assets costing more than Rs. 1 million to appraise utilization and estimate maintenance costs; the Circular does not indicate how information will be consolidated and classified. - Budget allocations would be more efficient if there were a consolidated view of major assets and their condition, and the data complied with standards of quality and timeliness. ### Recommendations on the Implementation Phase (from source) - Recommendation 9.1: Utilize data captured during project implementation and monitoring by the Planning Commission to develop analysis of portfolio trends and use to improve project implementation and development (Planning Commission, June 2025). Priority Medium - Recommendation 9.2: Planning Commission to lead efforts to increase compliance with requirements for ex-post review (Planning Commission, December 2025). Priority Low - Recommendation 10.1: Prepare and publish rules and procedures for federal ministries to retain and make accessible information on public assets. The guidelines should be prepared by the Finance Division, taking effect in mid-2024. Priority Medium - Recommendation 10.2: Develop standard methodologies for assessing the needs and cost of routine and capital maintenance for main asset classes (Finance and Planning Commission, Dec 2024). Priority Low - Recommendation 11.1: Government should adopt and gradually convert to the use of e-Procurement for development (and non-development) expenditure. (PPRA, 2024) - Recommendation 11.2: Build capacity to monitor procurement using a database; use this to monitor and assess compliance with procurement rules; and improve complaints disclosure. (PPRA, 2024) ### Climate context and implications for infrastructure - Even under a scenario of declining global greenhouse gas emissions, average annual temperatures are expected to rise by 0.8 degrees in the next two decades in Pakistan. - Under a high emissions climate scenario (SSP 3-7.0), the median annual temperature is predicted to rise 4.6 degrees above the 2015 level by the end of the century, and the number of days with temperatures above 40 degrees rising from around 60 to over 100. - Precipitation is also projected to rise gradually under the high emissions scenario. - Since the early 2000s, climate disasters have, on average, directly affected more than 4 million people, killed 500 people, and caused USD2 billion in material damages per year. - Hydrological hazards such as floods and landslides represent more than 70 percent of the recorded climate event occurrences in Pakistan. - The 2022 floods affected more than 30 million people (or around 14 percent of the population); more than 1,700 individuals lost their lives, with children comprising a third of the casualties. - Sindh province accounted for nearly 70 percent of the total damages and losses in the 2022 floods. - Initial estimates of the overall requirements to rebuild the affected areas amount to USD 16.3 billion. *Source: IMF | Technical Report (excerpts from content unit 1pakea2023002).* ### 89. Investment in climate-resilient infrastructure will be essential to mitigate the impacts of ### 1pakea2023002 - 89. Investment in climate-resilient infrastructure will be essential to mitigate the impacts of ### Climate risks and infrastructure needs - Increased precipitation variability could both increase damage from intense monsoon flooding and decrease overall water availability, affecting food security and hydropower production. - Poor city planning exacerbates urban flooding disasters; building codes are yet to adapt to pressures from climate change. - The World Bank’s 2023 Country Climate and Development Report estimates that between 6.5 and 9.0 percent of GDP will likely be lost by 2050 to climate change unless the challenge is addressed, as increased floods and heatwaves reduce agriculture yields, destroy infrastructure and lower labor productivity. - The 2022 floods demonstrate the need for: - greater investment in climate-resilient infrastructure; - improved early warning systems; - support mechanisms for affected communities to rebuild and adapt. ### Emissions profile and projected trajectory - Pakistan currently contributes less than one percent of global emissions. - 2018 total greenhouse gas (GHG) emissions were between 400 and 500 metric tons of carbon dioxide equivalent (MtCO2e), inclusive of land use and forestry. Estimates vary: Global Change Impact Studies Centre estimates 499 Mt CO2 Eq. in 2018, while ClimateWatch estimates around 428 Mt CO2 Eq. in the same year. - Economic growth drivers expected to raise energy demand and GHG emissions: - rapid urbanization; - industrialization; - rapid population growth. - Major sectoral emission contributors include: - transportation (increasing vehicle ownership); - energy-intensive industries; - agriculture (enteric fermentation from livestock, rice cultivation, use of nitrogen-based fertilizers). - Without proactive policies and investments in cleaner, more efficient technologies and infrastructure, Pakistan's emissions trajectory may become globally relevant. ### Climate objectives, targets, and institutional framework - The 2021 Revised Nationally Determined Contribution (NDC) envisages a 15 percent reduction in emissions through the country’s own investments, and a 35 percent reduction conditional on international grant finance (combined conditional commitment of 50 percent reduction by 2030 against the Initial NDC projection). - NDC priorities include the shift to renewable energy, the shift to electric vehicles, and adoption of flood risk mitigation measures in the Indus Basin. - The 2021 NDC covers new sectors and gases (waste and fluorinated gases) and proposes a broader approach to adaptation, emphasizing: - early warning systems; - improved water management; - climate-resilient infrastructure; - preservation of ecosystems and biodiversity. - Supporting national policies and targets include: - National Electric Vehicle Policy; - Renewable Energy Policy; - 2018 Transport Sector Policy; - National Climate Change Policy (NCCP) updated in 2021. - Institutional gaps: - Pakistan Climate Change Act (2017) established the Pakistan Climate Change Council and Authority, but the Climate Change Authority is not yet fully staffed and its mandate is not yet being met. - The Climate Change Council has met only once since the Act was introduced; most council positions remain vacant. ### NDC cost estimates and investment needs (Box 4.1) - The NDC projects the total cost of NDC implementation to reach USD 200 billion by 2030. - Estimated clean energy transition costs: - USD101 billion by 2030 and a further USD65 billion by 2040. - Rapid expansion of renewable energy projected to require around USD 50 billion by 2030 and USD 80 billion by 2040. - A further USD 20 billion is needed to upgrade the distribution network. - The MoCC estimates the cost of adaptation to be around USD 86 billion over the period to 2030. - The revised NDC includes a commitment to develop a National Adaptation Plan (NAP) to strengthen adaptation capacities, integrate adaptation into policies and programs, and scale up government efforts. ### Climate PIMA framework and assessment highlights - Climate PIMA assesses five public investment management practices from a climate perspective: - C1. Climate-aware planning; - C2. Coordination across public sector; - C3. Project appraisal and selection; - C4. Budgeting and Portfolio management; - C5. Risk management. - C1 (Climate-aware Planning) assessment: - Strength—Low; Reform Priority—Medium. - Key weaknesses: - gaps in national planning processes (2012–18 National Strategy is obsolete and not updated); - 2022–23 Annual Development Plan highlights progress on some NDC projects but does not provide a multi-year investment strategy for national development objectives, including climate objectives. - Sectoral policies exist but many lack costed project plans for achieving sectoral objectives (PIMA Institution 2). - Positive examples: National Water Policy (2021), National Electricity Policy (2021), Alternative and Renewable Energy Policy (2019) are aligned with NCCP. - The Indicative Generation Capacity Expansion Plan projects 63 percent of the energy mix will be from renewable energy sources (hydropower, solar, wind and bagasse) by 2030, consistent with the NDC target of achieving 60 percent renewable energy by 2030. - Pakistan's forthcoming National Adaptation Plan (NAP) is expected to refine and integrate current initiatives, and national and sectoral development plans should prepare costed investment plans to meet ambitious targets. ### Urban planning, building codes, and local measures - Regulations on spatial and urban planning and construction largely do not address climate-related risks and impacts on public investment. - Pakistan’s building code does not address minimizing greenhouse gas emissions or specify requirements for adapting to climate change. - Some provincial and city urban planning guidelines include flood risk provisions; examples of emerging local action: - Land and Building Acts of 2021 surveys in Khyber-Pakhtunkhwa consider natural hazards, availability of open and green spaces, and building types and structures. - 2021 Strategic Urban Master Plan for Umerkot includes an extensive climate change emergency contingency plan and identifies district-level climate challenges. *Source: IMF | Technical Report (excerpt provided).* ### 101. To enhance urban resilience, a nationwide strategy is needed, as well as adaptation plans ### 1pakea2023002 - 101. To enhance urban resilience, a nationwide strategy is needed, as well as adaptation plans ### Urban resilience strategy and planning - The original 2012 NCCP emphasized changes to urban planning and building codes and listed ten planned policy measures to support this process. - The Climate Resilient Urban Human Settlements Unit in the MoCC was established to strengthen city governments’ capacity to engage line departments and agencies on urban development challenges. - A Climate Change Resilient Urban Human Settlement Strategy is in the final stages of preparation and will contain a detailed databank of all provincial and federal buildings and codes for future use. - Recommendation: Use the forthcoming strategy as the basis to incorporate emissions reduction and resilience into new urban planning guidelines nationwide. ### Guidance for sectoral plans, resources, and institutional capacity - Specific guidance for the incorporation and costing of climate change considerations in sectoral plans is not yet provided; a detailed handbook is under preparation. - Existing broader guidance includes: - The NCCP itself. - The 4R Framework (Reduce, Respond, Rehabilitate, and Rebuild) providing guidelines, project proposals, and strategic objectives for provinces and line ministries to align projects with the NCCP. - The Planning Commission has prepared a handbook (not yet published) to incorporate climate resilience and adaptability in project design and development planning; the draft handbook provides guidance on: - Climate Hazard Initial Risk Assessment - Climate Adaptation and Resilience Assessment - Climate Mitigation Assessment - A list of climate indicators and templates for preparing these assessments - Capacity constraints: Both the MoCC and the Planning Commission are weakly resourced for overseeing and guiding a whole-of-government climate response, undermining their capacity to fulfill this role. ### Coordination between entities (C2: Strength—High; Reform Priority—Low) - Objective: Assess whole-of-government approach to climate change and coordination of public investment across federal and provincial levels, including externally financed projects, extra-budgetary entities, PPPs, and SOE oversight. - Coordination status: - Climate-relevant public investment decisions are well-coordinated across the federal government through the Framework for Implementation of National Climate Change Policy. - The National Climate Change Policy Implementation Committee monitors and updates the NCCP, supported by the MoCC for policy formulation, planning, implementation, and coordination with other federal ministries. - The CDWP evaluates investment proposals for alignment with the NCCP's strategic objectives. - Reported progress: - The latest progress report (2021) provides an overview of 44 major climate change initiatives with projects of combined value around USD 5.2 billion, and a listing of another 381 projects across the federal government and provinces implemented in line with the NCCP. - Provincial arrangements: - Provincial Implementation Committees established in each province report to the NCCP Implementation Committee; progress on large provincial projects is published in the NCCP progress report. - Three provinces have climate change action plans that outline investments and actions to achieve provincial adaptation targets and national mitigation targets. - Provincial plan statuses (Table 4.2): - Balochistan: has not yet formulated a climate plan that links with the NCCP. - Khyber Pakhtunkhwa: Khyber Pakhtunkhwa Climate Change Policy 2022 aligned with the NCCP; includes action plan and investment plan with identified financing sources and implementation mechanisms. - Punjab: Punjab Provincial Climate Change Action Plan contains planned actions and projects to improve resilience and achieve mitigation targets, but these are not costed. - Sindh: Sindh developed a Provincial Climate Change Policy in 2022 and a Provincial Climate Change Action Plan with UNDP support. ### Oversight of State-Owned Enterprises and recent legal changes - Current oversight gaps: - The existing oversight framework for SOEs does not ensure all SOE investments are consistent with climate-related objectives; PSDP scrutiny applies only to SOE projects that go through the PSDP process, not to self-financed SOE projects. - Sectoral regulatory alignment examples: - The Alternative Energy Development Board evaluates renewable energy proposals and assists with licensing and tariff petitions to NEPRA. - The Alternative and Renewable Energy Act (2019) specifies procurement processes for alternative and renewable energy by federally owned public power utilities and requires the Indicative Generation Capacity Expansion Plan to form the basis of on-grid procurements. - Opportunity from new legislation: - The State-Owned Enterprises (Governance and Operations) Act (2023) requires preparation and adoption of an ownership policy and centralizes oversight in the Central Monitoring Unit in the Corporate Finance Wing of the Finance Division. - Recommendation: Use the Act to incorporate climate sensitivity into SOE oversight, compulsory reporting on climate change issues, and adoption of environmental disclosure practices similar to the private sector. ### Implementation challenges in coordinated climate-sensitive investment management - Key constraints undermining effectiveness: - Capacity constraints across federal and provincial governments, particularly in the MoCC and the Planning Commission. - The MoCC has a limited budget and capacity and lacks authority to provide guidance and direction. - The new Climate Change Authority lacks dedicated staff. - The Planning Commission faces challenges integrating climate change considerations into development planning and coordinating cross-sectoral efforts. - Recommendation: Address capacity and resourcing constraints to strengthen existing coordination mechanisms. ### Project appraisal, PPPs, and inclusion of climate risk (C3: Strength—Low, Reform Priority—High) - Rationale: Project appraisal should fully understand climate impacts and exposure to climate-related harm prior to approval, reflecting both mitigation and adaptation implications. - Current appraisal framework in Pakistan: - The Manual for Development Projects requires environmental analysis to consider the natural environment, transboundary and global environmental aspects, with special focus on climate change (mitigation and adaptation). - The Instructions for Techno-Economic Feasibility Studies set out requirements for Climate Adaptation and Resilience Assessments and Climate Mitigation Assessments and integrate climate into many aspects of project preparation, but do not contain a methodology with technical details on climate change adaptation and mitigation assessments. - The Environmental Impact Assessment under the Environment Protection Act (1997, 2000) is fundamental and requires approvals for infrastructure projects; however, climate change is not presently required to be included in environmental assessments. - NDMA has guidance documents that include climate change, e.g., the Checklist for Disaster Risk Reduction. - The Planning Commission is working on extensive guidance to operationalize the high-level Manual and Instructions. - PPPs: - Exposure of PPP assets to future climate change is not an explicit technical element in PPP design or risk allocation requirements. - Pakistan has an extensive PPP portfolio with significant climate impacts. - New federal PPP framework and guidance are in development; draft PPP Risk Allocation Guidelines include natural disasters and extreme weather but no explicit climate-change guidance. - Definition and best practice (Box summaries preserved): - Climate-related appraisal includes technical assessments for adaptation (hazard analysis, risk mapping, vulnerability analysis, use of risk scenarios, climate-robust design, no regrets measures, real options) and mitigation (estimation of business-as-usual GHG emissions, gross and net GHG impacts, marginal abatement cost curves, social cost of carbon, shadow price of carbon, appropriate long-term discount rates). - World Bank example: (i) screening for climate risks and mitigation measures, (ii) conducting GHG accounting, (iii) applying a shadow carbon price for all material investments. - Project selection for PSDP: - There are no explicit project selection criteria for inclusion in the annual Public Sector Development Program; inclusion is a decision for the NEC based on a recommendation from the Annual Plan Coordination Committee. - Prior to PSDP inclusion, projects receive technical approval from the Planning Commission as “investment ready.” - Recommendation: Develop explicit selection criteria to compare projects across sectors. ### Budgeting, portfolio management, and fiscal tracking of climate-related investments (C4: Strength—Medium; Reform Priority—Medium) - Importance: Managing the government’s portfolio of climate-related investment projects across the project cycle is critical to meet mitigation and adaptation targets and to avoid underestimation of future maintenance costs due to climate risks. - Current status and practices: - Some climate-related public investment expenditures are identified in the annual budget; projects with climate objectives are reviewed ex-post. - Example: In 2021-22 the bulk of PSDP allocation to the MoCC went to the “Ten Billion Trees Tsunami Program” (Rs. 14 billion of Rs. 14.3 billion); the 2022-23 Annual Development Plan reviewed the project’s progress year by year across provinces and special areas. - The Auditor General of Pakistan has performed several climate-related audits; at the MoCC’s request it is auditing the first phase of the Ten Billion Trees Tsunami program. - No standard methodologies currently exist to estimate maintenance needs of infrastructure assets exposed to climate change, except for the National Highway Authority which maintains a vulnerability register and incorporates climate risks into maintenance estimations. - Fiscal tracking and reforms: - The Finance Division does not yet track climate-related investments or spending but has initiated a green tagging exercise under Green Responsive Budgeting. - The 2023-24 Budget Call Circular asks line ministries to estimate the share of their 2022-23 budget—and ex post spending—that relate to climate adaption and mitigation under a well-defined typology, and to report current and capital spending; the same information is requested for 2023-24 budget submissions. - The Budget Call Circular also asks line ministries to identify key performance indicators related to climate in their budget submissions. - Existing Government Financial Accounting and Budgeting System (FABS) functionalities (standardized chart of accounts and tagging at stages of budget preparation, execution, and reporting) will facilitate this exercise. - Going forward ambitions include: - (i) prepare and issue green-budget statements in budget documents; and - (ii) include provincial governments in the green tracking system. *Source: IMF Technical Report content unit 1pakea2023002.* ### Box 4.4 Performance Audits undertaken by the Auditor General of Pakistan Relevant To Climate ### Box 4.4 Performance Audits undertaken by the Auditor General of Pakistan Relevant To Climate ### Performance audits by the Auditor General of Pakistan (AGP) - Types of climate-related audits undertaken by the AGP: - Performance audit of specific projects: reviews achievements against intended objectives. Recent audits include hydro projects with climate-mitigation objectives. Example: audit of the Golen Hydropower Project (2021) identified design flaws that did not incorporate mitigation information (on maximum flood levels) known after the 2010 floods. - Performance audits of organizations related to climate change and environment: in 2022 AGP undertook compliance and performance audits of climate change, environment, and disaster management organizations at the Federal level and in all four provinces. Federal organizations audited: Ministry of Climate Change, Earthquake Reconstruction and Rehabilitation Authority, National Disaster Risk Management Fund, and National Disaster Management Authority. - Thematic audit: assessed the policy framework for implementation of National Disaster Management Plan 2012-22 and evaluated agencies’ efforts toward Disaster Risk Reduction. - Source reference provided by the original text: AGP audit report available at www.agp.gov.pk ### Risk management of climate-related fiscal risks (C5) — findings - Identifying and managing fiscal risks to public infrastructure from climate change should be integral to government risk management (paragraph 116). - Existing government disaster risk management strategy coverage: - The 2012 National Disaster Management Plan and the 2019 National Disaster Response Plan include hazard and vulnerability analysis of climate-related risks (floods, droughts, cyclones). - Flood Management Plan IV presents comprehensive flood risk modelling and mitigation measures; National Highway Authority uses this information; presented in National Disaster Management Authority’s annual Contingency Plan for the Monsoon.86 - There is no central assessment of exposure of public infrastructure and assets to climate-related risks; the link between disaster risks and climate change is weak (paragraph 117). - Government preparing an updated National Disaster Management Plan to elaborate on changing vulnerability from climate change. National Disaster Risk Management Fund (NDRMF) modelling is being undertaken to provide a database of public (and private) infrastructure exposed to disaster risks, including from climate change. - Ex-ante financing mechanisms (paragraph 118): - Ministry of Finance is authorized to provide technical supplementary grants; around Rs. 195 billion is maintained by the Ministry of Finance to support any organization that requires a technical supplementary grant when needed.87 - National Disaster Management Authority manages the National Disaster Management Fund (special purpose vehicle with privileges and immunities that exempt it from many standard disbursement controls). - National Disaster Risk Management Fund established to provide financing for disaster risk mitigation; has been used for funding during large disasters (most recently during the 2022 floods). - Provinces maintain Provincial Disaster Management Funds for similar purposes. - Guidelines and regulatory framework for use of these ex-ante mechanisms are vague and could be strengthened. - Fiscal risk disclosure (paragraph 119): - The Statement of Fiscal Risk prepared with the Annual Budget Statement does not present any information on climate change related risks; the 2022-23 Statement of Fiscal Risks has limited, qualitative information. - With ADB support, government preparing a new, more detailed Statement of Fiscal Risks to accompany 2023-24 Annual Budget Statement. The 2023-24 statement is expected to contain a section summarizing qualitatively and quantitatively the fiscal risks from climate change in Pakistan, drawing on ADB analysis, and to include analysis of long-term fiscal sustainability under different climate scenarios (some international examples in Box 4.5). ### Illustrative international approaches (Box 4.5) - United Kingdom (OBR, 2021 Fiscal Risk Report): - Created a “stable deficit baseline” and a “historical shocks baseline” by layering periodic fiscal risks on top of it. - Added an “unmitigated global warming scenario” based on the RCP8.5-scenario that assumes the cost of adaptation is 0.3 percent of GDP a year, and assumes natural disasters cost twice as much and occur twice as frequently. - Framework provides illustrative scenarios of potential fiscal scale of climate change risks. - Georgia (IMF technical assistance, 2022): - Assessed fiscal impact from three perspectives: macroeconomic impact of higher temperatures on productivity; fiscal cost of more frequent/severe natural disasters (floods, landslides, droughts); qualitative review of discrete fiscal risks (long-run power contracts, guarantees, on-lent loans to SOEs). - Analysis found climate change could reduce GDP per capita by 13 percent by the end of the century and increase public debt levels by 18 percent of GDP, both relative to the baseline. ### Recommendations on Climate-Sensitive Public Investment (Issues C1–C7 and recommendations) - Issue C1: Insufficient analysis/awareness of infrastructure vulnerability to climate-related risks; no centralized assessment of exposure. - Recommendation C1: Identify and document infrastructure assets in key sectors (e.g., energy, transport and communications, and health) exposed to climate-related natural disaster risks, such as flooding, cyclones, and heatwaves (National Disaster Management Authority, 2024). Priority Medium - Issue C2: Gaps in national planning framework weaken investment planning to meet climate objectives; NCCP Implementation Framework guidance not uniformly adopted; no specific guidance for incorporating and costing climate change projects in sectoral plans. - Recommendation C2.1: Clearly identify sectoral contributions to climate change mitigation (NDC) and adaptation targets (forthcoming NAP) and prepare costed investment plans as part of sectoral and national planning processes. (To be undertaken through NCCP Implementation Committee Processes, coordinated by the MoCC and Planning Commission during NAP preparation, taking effect in 2024.) Priority Medium - Recommendation C2.2: Finalize and publish the handbook on incorporating climate resilience and adaptability in sectoral planning and project preparation processes (Planning Commission, 2023). Priority High - Issue C3: Spatial and urban planning and construction regulations do not address climate-related risks and impacts on public investment; building code fails to reduce GHG emissions and lacks adaptation specifications. - Recommendation C3: Finalize the Climate Change Resilient Urban Human Settlement Strategy and incorporate climate-resilience and mitigation measures in future building codes and urban planning guidelines (MoCC, 2023). Priority High - Issue C4: Appraisal process can be strengthened to include climate factors. - Recommendation C4: Develop more specific guidance on appraisal issues such as valuation of GHG emissions and climate impacts to ensure comparability across projects in appraisal and selection stages (Planning Commission, December 2024). Priority Medium - Issue C5: Insufficient information on budget implications of climate-related actions; need for transparency to support policymaking and climate financing. - Recommendation C5.1: Improve transparency by presenting in budget documentation summary information on key aspects of the PSDP and the wider public investment program. The Planning Commission should develop a proposal in concert with the Finance Division for ECNEC approval. Agreement on approach should be reached by mid-2023 for inclusion in the 2024-25 budget documentation. Priority Medium - Recommendation C5.2: Advance green budgeting work, including budget tracking and publishing information on climate-related costs to the budget: Finance Division to publish climate-related spending for FY2023-24 following a budget tracking exercise; Budget statement to include a section on objectives, targets, outcomes, and medium-term spending plans (FY2023-24 budget); Finance Division to provide more guidance to line ministries in BCC for FY24-25 and gradually extend tracking to revenue measures; extend green tracking system to all provinces (Provinces with support from Controller General of Accounts). Priority Medium - Recommendation C5.3: Prepare and publish long-term fiscal sustainability analysis in the Statement of Fiscal Risks under different climate change scenarios, and assess and publish information on discrete fiscal risks arising under these scenarios (Economic Adviser, mid 2024). Priority Medium - Issue C6: Allocative efficiency can be improved by applying comprehensive selection criteria that include climate change. - Recommendation C6: Include climate factors in the criteria for selecting projects to be developed and published. Priority High - Issue C7: Capacity constraints hinder implementation of Pakistan's climate agenda. - Recommendation C7: Train staff to strengthen capacity of the Ministry of Climate Change, Planning Commission, and Climate Change Authority to oversee and coordinate investment projects targeting NCCP and NDC goals. Maximize development partner training opportunities and develop domestic training capabilities. Priority High ### Legal and regulatory framework — cross-cutting notes - Public investment governed by revised framework: PFM Act (2019), Manual for Development Projects (2021), Budget Manual, Public-Private Partnership Act (2016, revised 2020), FRDLA (amended 2022), new SOE law (2023), Public Procurement Rules (2004), National Accountability Ordinance (1999). - Issues identified: - Need for additional guidance (e.g., responsibilities of accounting officers for maintenance of public assets and asset registers). - Additional procurement regulation needed for PPPs to standardize processes. - Need for capacity building (training, IT system development) to realize value from new laws. - Environmental and PFM framework should be updated to reflect focus on climate mitigation, adaptation, disaster resilience, and delivering on NDCs; gaps remain in legal and institutional mechanisms to coordinate and implement national climate objectives, and urban planning/building code regulations should be updated. *Source: AGP audit report; IMF Technical Report (Box 4.4).* ### 123. Three IT systems support development and implementation of the PSDP. These are the ### 1pakea2023002 - 123. Three IT systems support development and implementation of the PSDP. These are the ### IT systems supporting PSDP - Three systems: Intelligent Project Automation System (iPAS), Project Monitoring and Evaluation System (PMES), Financial Accounting and Budgeting System (FABS). - No major systems supporting plan development or asset management. ### iPAS (Intelligent Project Automation System) - Administered by the Planning Commission; became operational for the 2021-22 fiscal year. - Intended to track submission, review, and approval at all stages for the PC-I and PC-II forms, and allocation of funding among technically approved projects in the PSDP. - Beginning with the preparation of the 2024-25 PSDP, and subsequent implementation, it will incorporate similar tracking for the PC-III and PC-IV forms currently under the responsibility of the PMES. - Web-based and widely accessible; designed and being developed locally. - Provinces use the system for projects included in the PSDP and provincial projects of national importance approved by the NEC. - Will retain historical information (such as the original and revised PC-I and PC-ii forms) but has not been populated with the stock of ongoing projects and their related forms. - The system exchanges data automatically with FABS. - Not currently used to track projects relating to climate change. ### PMES (Project Monitoring and Evaluation System) - Administered by the Planning Commission; became operational in 2008. - Designed to track the review and approval of the PC-III (annual project implementation plans) and PC-IV (project completion) forms. - Designed and developed locally. - Scheduled to cease operations at the beginning of the 2025-26 fiscal year, after its functions have been absorbed into iPAS. - Currently does not share data automatically with FABS. ### FABS (Financial Accounting and Budgeting System) - Administered by the Controller General; FABS is an SAP financials system first graded from legacy systems in 2004 and again in 2014. - Used for federal, provincial, and district level budgeting, expenditure control and payments, and financial reporting. - Relating to the PSDP, FABS is used to record releases, re-appropriations, supplementary grants, and surrenders. - Designed with the premise that accounting principles would shift from cash to modified cash; this shift has not occurred, resulting in unimplemented capabilities relating to commitments, asset management, and liabilities. ### Identified shortcomings and enhancement opportunities for IT systems - Data quality in iPAS: - Users enter data directly with no central quality control. - Examples: ministries classify some requests as PC-I rather than PC-II; approval dates in iPAS often inconsistent with date of authorization letters. - Analytical capability: - iPAS should include standard analytical reports; it has potential for analysis beyond simple descriptive statistics to improve public investment management. - Asset management: - No central asset management system exists. - Some ministries have sophisticated systems for operation and maintenance, but a central system with a minimum set of standard data on assets would support planning, maintenance, appraisal, and selection components of the PIM cycle, including alignment with climate change policy goals. - Classification and climate tagging: - iPAS, as a bespoke locally developed system, can relatively easily be modified to handle additional classifications, such as identifying climate change mitigation and adaptation projects, and distinguishing maintenance, rehabilitation, and re-construction projects. ### Capacity of institutions (Planning Commission and climate bodies) - Staffing and structure of Planning Commission: - Staffed principally by the Economic and Technical establishment cadres. - Economic cadre has two components addressing economic policy and operational issues. - There are 29 Technical cadres (engineering, physical planning and housing, water, etc.) providing expertise to evaluate project proposals. - Staff typically rotate every three years; rotation may be within economic cadre (policy ↔ operational) or to another administrative unit. - Rotation benefits: populating line ministries and provinces with experienced staff and enriching Commission work with staff having field experience; these benefits outweigh loss of persons with operational knowledge. - Training venues and status: - Pakistan Planning and Management Institute (under the Planning Commission): courses open to Commission staff, line ministries, and provincial governments; recent courses covered PC-I and PC-II preparation, project appraisal and risk management, monitoring and evaluation techniques, and project life cycle management. - Secretariat Training Institute (under the Establishment Division, Cabinet Secretariat): conducts specialized training and general capacity development; recent courses covered General Financial Rules and Procedures, and Public Sector Management. - Commission coordinates participation in training outside Pakistan, often offered by development partners. - No major initiatives underway to increase training opportunities or to shift the direction of current capacity development venues. - Neither training venue currently incorporates climate change issues into curricula. ### Capacity constraints for climate change agenda - MoCC limitations: - MoCC (responsible for climate change policymaking, coordination, and monitoring international agreements) is limited in effectiveness due to insufficient staffing. - Planning Commission constraints: - Capacity constraints within the Planning Commission impact government's ability to design and implement sustainable green-growth policies. - Climate Change Authority: - As the Climate Change Authority begins operation, it is important to ensure adequate staffing and empowerment to engage effectively with public and private sectors at national and provincial levels. - Provincial capacity: - Supporting provinces in implementing climate change agenda requires addressing current institutional and technical capacity weaknesses. ### Training on climate change issues - Currently largely dependent on external resources. - MoCC lacks own means to train staff at scale to meet needs. - Pakistan Planning and Management Institute and Secretariat Training Institute have not incorporated climate change into existing courses or adopted new climate courses. - International agencies (UNDP, UNFCCC) may finance and conduct training to meet short-run staffing needs. - Local training should focus on Pakistan-specific measures: National Climate Change Policy, Nationally Determined Contributions document, and National Adaptation Plan (under development). - Long-run objective: develop local capacity to train staff on climate change issues. ### Annex 1: Selected Action Plan recommendations (Planning Phase, Investment Allocation, Implementation) - Planning Phase highlights: - 1 Develop a five-year infrastructure strategy identifying major projects across all sectors and funding sources. - Establish high level commitment to developing a five-year strategy from NEC — Priority: High — Responsibility: PC — Timing: Immediate - Start stakeholder meetings and follow earlier process behind preparation of five-year plan, including creation of sectoral working groups — Priority: High — Responsibility: PC — Timing: End-2023 - Prepare strategy and submit to relevant approving bodies for publication — Priority: High — Responsibility: PC — Timing: End-2024 - 2 Appraisal strengthening: - 2.1 Set up stakeholder group to review PCI and PCII experiences and CORE project focus — Priority: Medium — Responsibility: PC — Timing: Immediately - 2.2 Determine which projects require independent scrutiny; Formalize TORs for independent experts — Priority: Low — Responsibility: PC — Timing: Dec 2024 - 2.3 Develop specific technical guidance on economic, financial, technical analysis; develop standard guidance, by sector where relevant — Priority: Medium — Responsibility: PC and Finance Division — Timing: Early 2024; Approve new guidance and procedures — Priority: Medium — Responsibility: NEC — Timing: Mid-2024 - 3 Autonomous entities and reporting: - 3.1 Review powers to obtain information on investment projects across funding sources; develop template and periodic data request — Priority: High — Responsibility: PC and Finance Division — Timing: Dec 2023 and Jun 2024 - 3.2 Update Manual for Investment Projects to mandate publication of final appraisal reports; ensure planning and methodologies updated and aligned with government policy, particularly climate change — Priority: High — Responsibility: PC — Timing: End-2023 - 3.3 Put in place mechanisms for reporting on SOE fiscal risks related to public investments; subject to SOE ownership policy, coordination mechanisms for SOE projects — Priority: High/Medium — Responsibility: Finance Division (with PC) — Timing: September 2024; June 2025 - 4 PPP frameworks: - Build interinstitutional consensus and action plan for common procedures — Priority: Medium — Responsibility: P3A — Timing: September 2023 - Develop an integrated and long-term national PPP strategy or policy — Priority: Medium — Responsibility: P3A — Timing: End-2023 - Consolidate a PPP register across federal and provincial governments — Priority: High — Responsibility: Finance Division and P3A — Timing: Sep 2024 - Put in place procedures for periodic reporting on PPP execution — Priority: High — Responsibility: Finance Division — Timing: Sep 2024 - 5 Privatization and SOE reforms: - Undertake combined analysis and form consensus on medium-term action plan for privatizations, regulatory reforms, restructuring — Priority: Medium — Responsibility: Finance Division coordinated task group — Timing: End-2023; Mid-2024; End-2024; Mid-2025 for implementation steps. - Investment Allocation highlights: - 6 Develop and publish criteria for selecting projects to receive funding in the PSDP. - Draft for internal proposal — Priority: High — Responsibility: PC — Timing: End-2023 - Stakeholder consultation — Priority: High — Responsibility: PC — Timing: Early 2024 - Present final draft for approval — Priority: High — Responsibility: PC and NEC — Timing: Mid-2024 - 7 Conduct a one-time review of all technically approved projects to reduce active projects to high priority ones. - Draft criteria and obtain ECNEC approval — Priority: High — Responsibility: PC (and ECNEC) — Timing: First half of 2024 - Conduct review — Priority: High — Responsibility: PC — Timing: Second half of 2024 - Approve list removing technical approval where appropriate — Priority: High — Responsibility: NEC — Timing: End-2024 - 8 Strengthen budget framework: - 8.1 Prepare multi-year indicative budget ceilings on overall development (PSDP) budget; include in Project Call Circular; provide guidance to line ministries — Priority: Medium — Responsibility: Finance Division and PC — Timing: Budget preparation FY24-25 - 8.2 Review rules to restrict agencies funding projects not formally approved as part of the budget; review rules for supplementary grants for development projects — Priority: Medium — Responsibility: Finance Division — Timing: End 2023 - 9 Improve transparency by presenting summary information on key aspects of the PSDP in budget documentation. - Develop format and location — Priority: Medium — Responsibility: PC and Finance Division jointly — Timing: End-2023 - Approve format/location — Priority: Medium — Responsibility: ECNEC — Timing: Early 2024 - Include summary in FY24/25 Budget — Priority: Medium — Responsibility: PC — Timing: Budget FY24/25 - Investment Implementation highlights: - 10 Active portfolio oversight: - 10.1 Utilize PMES and iPAS data to develop dashboards and summary data; develop monitoring report on major projects and submit at least annually to NEC — Priority: Medium — Responsibility: PC — Timing: Dec 2024; June 2025 - 10.2 Increase compliance with requirements for ex-post review; PC to provide training and guidance and report on compliance — Priority: Low — Responsibility: PC — Timing: Dec 2025 - 11 Public asset information and maintenance: - 11.1 Prepare and publish rules/procedures for federal ministries to retain and make accessible information on public assets; draft guidelines — Priority: Medium — Responsibility: Finance Division — Timing: End-2023; present to CDWP and ECNEC — Priority: Medium — Responsibility: Finance Division (CDWP and ECNEC) — Timing: Mid-2024; provide training and phased implementation — Priority: Medium — Responsibility: Finance Division — Timing: Beginning second half of 2024 - 11.2 Develop standard methodologies for assessing needs and cost of routine and capital maintenance for main asset classes; complete group work commissioned by Finance Division — Priority: Low — Responsibility: Finance Division and Planning Commission — Timing: Due end 2023 - 12 Procurement improvements: - 12.1 Adopt and progressively convert to e-procurement for development and non-development expenditure; implement e-procurement system and establish database of procurement — Priority: Medium — Responsibility: PPRA — Timing: End 2024 *Source: IMF Technical Report excerpts on PSDP IT systems, capacity, and Annex 1 action plan.* ### 12.2 Build the capacity to monitor public ### 12.2 Build the capacity to monitor public procurement using a database; and monitor and assess compliance with procurement rules; and share information on procurement complaints. ### Procurement monitoring — recommendations and actions - Assign staff to be responsible for monitoring procurement system data - Develop a reporting template for periodic procurement reporting, including on complaints - Priority: Medium - Responsibility: PPRA - Timing: End 2024 ### Climate Sensitive Public Investment Management — summary of issues, recommendations, actions, priorities, responsibilities, and timing - C1. There is a lack of sufficient analysis or awareness regarding the vulnerability of Pakistan's infrastructure assets to climate-related risks such as floods, cyclones, and heatwaves. - Recommendation: C1 Identify and document infrastructure assets in key sectors (e.g., energy, transport and communications, and health) that are exposed to climate-related natural disaster risks, such as flooding, cyclones, and heatwaves. - Action: Drawing on hydrological modelling and modelling undertaken at the National Disaster Risk Management Fund, prepare analysis of energy, health, and transport and communication assets vulnerable to flood risks - Priority: Medium - Responsibility: NDMA, with NDRMF and Sector Ministries and Agencies - Timing: Mid-2024 - C2. Gaps in the national planning framework weaken investment planning to meet climate change objectives - C2.1 Clearly identify sectoral contributions to climate change mitigation (NDC) and adaptation targets (forthcoming NAP) and prepare costed investment plans that contribute to the achievement of these goals as part of the sectoral and national planning process. - Action: Expand modelling to include climatological and meteorological disaster risks - Priority: Medium - Responsibility: NDMA, with NDRMF and Sector Ministries and Agencies - Timing: End-2025 - Action: As part of the preparation of strategies in Recommendation 1 (above), identify policies and costed projects for meeting the climate-related goals, as part of the development of the next five-year national plan - Priority: High - Responsibility: MoCC with Sector Groups and PC - Timing: Mid-2024 - C2.2 Finalize and publish the handbook on incorporating climate sensitivity in sectoral planning and project preparation processes - Action: Finalize and publish the handbook on integrating climate resilience and adaption into project design and development planning - Priority: High - Responsibility: PC - Timing: Immediately - C3. Regulations on spatial and urban planning and construction do not address climate-related risks and impacts on public investment in Pakistan. - Recommendation: C3 Finalize the Climate Change Resilient Urban Human Settlement Strategy and incorporate climate-resilience and mitigation measures in future building codes and urban planning guidelines - Action: Finalize and publish the Climate Change Resilient Urban Human Settlement Strategy - Priority: High - Responsibility: MoCC - Timing: Immediately - Action: Review and revise the Building Code to incorporate climate resilience and emissions mitigation - Priority: High - Responsibility: MoCC, NDMA, and Pakistan Engineering Council - Timing: End-2024 - Action: Update provincial urban planning codes to adopt principles included in the Climate Change Resilient Urban Human Settlement Strategy - Priority: High - Responsibility: MoCC and provincial governments - Timing: End-2024 - C4. The appraisal process can be further strengthened. - Recommendation: C4 Develop specific technical guidance on key issues such as how to conduct various forms of climate, economic, financial, technical analysis including on discount rates, shadow pricing and quantification of climate costs, systematically incorporating climate risks. - Action: Set up inter-ministerial stakeholder – MoF, line ministries, NHA, PPA, provinces to take stock of assessment tools that are currently used and needs for central support and guidance - Priority: Medium - Responsibility: PC - Timing: Immediately - Action: Develop standard guidance, by sector where relevant, including methodology for comparison across sectors - Priority: Medium - Responsibility: PC and Finance Division - Timing: Early 2024 - Action: Approve new guidance and procedures - Priority: Medium - Responsibility: NEC - Timing: Mid-2024 - C5. There is insufficient information on the investment budget. - C5.1 Advance the work on green budgeting, including budget tracking and publish information on climate related costs to the budget. - Action: Publish climate-related spending for FY2023-24, following budget tracking exercise. Budget statement to include a section on the objectives, targets, outcomes, and medium-term spending plans - Priority: Medium - Responsibility: Finance Division - Timing: FY23/24 Budget - Action: Build on current tracking exercise to provide more guidance to line ministries in BCC for FY24-25, and gradually extend tracking to revenue measures - Priority: Medium - Responsibility: Finance Division - Timing: FY24/25 Budget - Action: Extend green tracking system to all provinces - Priority: Medium - Responsibility: Finance / provinces - Timing: End 2025 - C5.2 Prepare and publish long term fiscal sustainability analysis under different climate change scenarios, and assess and publish information on discrete fiscal risks arising under these scenarios. - Action: Incorporate technical analysis undertaken with ADB on climate-related fiscal risks in the Statement on Fiscal Risks - Priority: Medium - Responsibility: Economic Adviser - Timing: FY23/24 Budget - Action: Undertake modelling of long-term fiscal sustainability under different climate change scenarios - Priority: Medium - Responsibility: Economic Adviser - Timing: End-2023 - Action: Estimate discrete fiscal risks (e.g. from PPPs and SOEs) related to climate change - Priority: Medium - Responsibility: Economic Adviser - Timing: End-2023 - Action: Publish long-term modelling and discrete fiscal risks in Statement of Fiscal Risks - Priority: Medium - Responsibility: Economic Adviser - Timing: FY24/25 Budget - C6. Allocative efficiency can be improved with selection criteria that include climate change - Recommendation: C6 Include climate factors in the criteria for selecting projects - Action: Draft for internal proposal with genera selection criteria mentioned above - Priority: High - Responsibility: PC - Timing: End-2023 - Action: Undertake stakeholder consultation with CDWP, ECNEC, Finance Division, key line ministries, and provinces - Priority: High - Responsibility: PC - Timing: Early 2024 - Action: Present final draft proposal for approval - Priority: High - Responsibility: PC and NEC - Timing: Mid-2024 - C7. Capacity constraints pose a significant challenge to the implementation of Pakistan's climate change agenda. - Recommendation: C7 Train staff to strengthen the capacity of MoCC, PC, and Climate Change Authority to oversee and coordinate investment projects targeting the achievement of NCCP and NDC goals. Maximize training opportunities afforded by development partners and develop domestic training capabilities. - Action: Maximize training opportunities offered by development partners, coordinated by MoCC. - Priority: High - Responsibility: MoCC, PC, and Climate Change Authority - Timing: Ongoing - Action: Develop a plan for long term training of staff needed to implement national policies, plans, and commitments by all federal agencies - Priority: High - Responsibility: MoCC - Timing: Mid-2024 - Action: Expand coverage of climate issues in Pakistan Planning and Management Institute courses – after policies and procedures that affect development planning and the PSDP are clear - Priority: High - Responsibility: MoCC in liaison with PC - Timing: End-2024 ### Annex 2. PIMA Questionnaire — selected indicators and scoring framework (A. Planning Sustainable Levels of Public Investment; B. Ensuring Public Investment is Allocated to the Right Sectors and Projects) - Scoring legend: - 1 = To no or a lesser extent - 2 = To some extent - 3 = To a greater extent - A. Planning Sustainable Levels of Public Investment — sample indicators - 1. Fiscal targets and rules: Does the government have fiscal institutions to support fiscal sustainability and to facilitate medium-term planning for public investment? - 1.a. Is there a target or limit for government to ensure debt sustainability? - 1: There is no target or limit to ensure debt sustainability. - 2: There is at least one target or limit to ensure central government debt sustainability. - 3: There is at least one target or limit to ensure general government debt sustainability. - 1.b. Is fiscal policy guided by one or more permanent fiscal rules? - 1: There are no permanent fiscal rules. - 2: There is at least one permanent fiscal rule applicable to central government. - 3: There is at least one permanent fiscal rule applicable to central government, and at least one comparable rule applicable to a major additional component of general government, such as subnational government (SNG). - 1.c. Is there a medium-term fiscal framework (MTFF) to align budget preparation with fiscal policy? - 1: There is no MTFF prepared prior to budget preparation. - 2: There is an MTFF prepared prior to budget preparation but it is limited to fiscal aggregates, such as expenditure, revenue, the deficit, or total borrowing. - 3: There is an MTFF prepared prior to budget preparation, which includes fiscal aggregates and allows distinctions between recurrent and capital spending, and ongoing and new projects. - 2. National and Sectoral Planning: Are investment allocation decisions based on sectoral and inter-sectoral strategies? - 2.a. Does the government prepare national and sectoral strategies for public investment? - 1: National or sectoral public investment strategies or plans are prepared, covering only some projects found in the budget. - 2: National or sectoral public investment strategies or plans are published covering projects funded through the budget. - 3: Both national and sectoral public investment strategies or plans are published and cover all projects funded through the budget regardless of financing source (e.g. donor, public corporation (PC), or PPP financing). - 2.b. Are the government’s national and sectoral strategies or plans for public investment costed? - 1: The government’s investment strategies or plans include no cost information on planned public investment. - 2: The government’s investment strategies include broad estimates of aggregate and sectoral investment plans. - 3: The government’s investment strategies include costing of individual, major investment projects within an overall financial constraint. - 2.c. Do sector strategies include measurable targets for the outputs and outcomes of investment projects? - 1: Sector strategies do not include measurable targets for outputs or outcomes. - 2: Sector strategies include measurable targets for outputs (e.g., miles of roads constructed). - 3: Sector strategies include measurable targets for both outputs and outcomes (e.g., reduction in traffic congestion). - 3. Coordination between Entities: Is there effective coordination of the investment plans of central and other government entities? - 3.a. Is capital spending by SNGs, coordinated with the central government? - 1: Capital spending plans of SNGs are not submitted to, nor discussed with central government. - 2: Major SNG capital spending plans are published alongside central government investments, but there are no formal discussions, between the central government and SNGs on investment priorities. - 3: Major SNG capital spending plans are published alongside central government investments, and there are formal discussions between central government and SNGs on investment priorities. - 3.b. Does the central government have a transparent, rule-based system for making capital transfers to SNGs, and for providing timely information on such transfers? - 1: The central government does not have a transparent rule-based system for making capital transfers to SNGs. - 2: The central government uses a transparent rule-based system for making capital transfers to SNGs, but SNGs are notified about expected transfers less than six months before the start of each fiscal year. - 3: The central government uses a transparent rule-based system for making capital transfers to SNGs, and expected transfers are made known to SNGs at least six months before the start of each fiscal year. - 3.c. Are contingent liabilities arising from capital projects of SNGs, PCs, and PPPs reported to the central government? - 1: Contingent liabilities arising from major projects of SNGs, PCs, and PPPs are not reported to the central government. - 2: Contingent liabilities arising from major projects of SNGs, PCs, and PPPs are reported to the central government, but are generally not presented in the central government’s budget documents. - 3: Contingent liabilities arising from major projects of SNGs, PCs, and PPPs are reported to the central government, and are presented in full in the central government’s budget documents. - 4. Project Appraisal: Are project proposals subject to systematic project appraisal? - 4.a. Are major capital projects subject to rigorous technical, economic, and financial analysis? - 1: Major capital projects are not systematically subject to rigorous, technical, economic, and financial analysis. - 2: Major projects are systematically subject to rigorous technical, economic, and financial analysis. - 3: Major projects are systematically subject to rigorous technical, economic, and financial analysis, and selected results of this analysis are published or undergo independent external review. - 4.b. Is there a standard methodology and central support for the appraisal of projects? - 1: There is no standard methodology or central support for project appraisal. - 2: There is either a standard methodology or central support for project appraisal. - 3: There is both a standard methodology and central support for project appraisal. - 4.c. Are risks taken into account in conducting project appraisals? - 1: Risks are not systematically assessed as part of the project appraisal. - 2: A risk assessment covering a range of potential risks is included in the project appraisal. - 3: A risk assessment covering a range of potential risks is included in the project appraisal, and plans are prepared to mitigate these risks. - 5. Alternative Infrastructure Financing: Is there a favorable climate for the private sector, PPPs, and PCs to finance in infrastructure? - 5.a. Does the regulatory framework support competition in contestable markets for economic infrastructure (e.g., power, water, telecoms, and transport)? - 1: Provision of economic infrastructure is restricted to domestic monopolies, or there are few established economic regulators. - 2: There is competition in some economic infrastructure markets, and a few economic regulators have been established. - 3: There is competition in major economic infrastructure markets, and economic regulators are independent and well established. - 5.b. Has the government published a strategy/policy for PPPs, and a legal/regulatory framework which guides the preparation, selection, and management of PPP projects? - 1: There is no published strategy/policy framework for PPPs, and the legal/regulatory framework is weak. - 2: A PPP strategy/policy has been published, but the legal/regulatory framework is weak. - 3: A PPP strategy/policy has been published, and there is a strong legal/regulatory framework that guides the preparation, selection, and management of PPP projects. - 5.c. Does the government oversee the investment plans of public corporations (PCs) and monitor their financial performance? - 1: The government does not systematically review the investment plans of PCs. - 2: The government reviews the investment plans of PCs, but does not publish a consolidated report on these plans or the financial performance of PCs. - 3: The government reviews and publishes a consolidated report on the investment plans and financial performance of PCs. - B. Ensuring Public Investment is Allocated to the Right Sectors and Projects — sample indicators - 6. Multi-Year Budgeting: Does the government prepare medium-term projections of capital spending on a full cost basis? - 6.a. Is capital spending by ministry or sector forecasted over a multiyear horizon? - 1: No projections of capital spending are published beyond the budget year. - 2: Projections of total capital spending are published over a three to five-year horizon. - 3: Projections of capital spending disaggregated by ministry or sector are published over a three to five-year horizon. - 6.b Are there multiyear ceilings on capital expenditure by ministry, sector, or program? - 1: There are no multiyear ceilings on capital expenditure by ministry, sector, or program. - 2: There are indicative multiyear ceilings on capital expenditure by ministry, sector, or program. - 3: There are binding multiyear ceilings on capital expenditure by ministry, sector, or program. - 6.c. Are projections of the total construction cost of major capital projects published? - 1: Projections of the total construction cost of major capital projects are not published. - 2: Projections of the total construction cost of major capital projects are published. - 3: Projections of the total construction cost of major capital projects are published, together with the annual breakdown of these cost over a three-five-year horizon. - 7. Budget Comprehensiveness and Unity: To what extent is capital spending, and related recurrent spending, undertaken through the budget process? - 7.a. Is capital spending mostly undertaken through the budget? - 1: Significant capital spending is undertaken by extra-budgetary entities with no legislative authorization or disclosure in the budget documentation. - 2: Significant capital spending is undertaken by extra-budgetary entities, but with legislative authorization and disclosure in the budget documentation. - 3: Little or no capital spending is undertaken by extra-budgetary entities. - 7.b. Are all capital projects, regardless of financing source, shown in the budget documentation? - 1: Capital projects are not comprehensively presented in the budget documentation, including PPPs, externally financed, and PCs’ projects. - 2: Most capital projects are included in the budget documentation, but either PPPs, externally financed, or PCs’ projects are not shown. - 3: All capital projects, regardless of financing sources, are included in the budget documentation. - 7.c. Are capital and recurrent budgets prepared and presented together in the budget? - 1: Capital and recurrent budgets are prepared by separate ministries, and/or presented in separate budget documents. - 2: Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, but without using a program or functional classification. - 3: Capital and recurrent budgets are prepared by a single ministry and presented together in the budget documents, using a program or functional classification. - 8. Budgeting for Investment: Are investment projects protected during budget implementation? - 8.a. Are total project outlays appropriated by the legislature at the time of a project’s commencement? - 1: Outlays are appropriated on an annual basis, but information on total project costs is not included in the budget documentation. - 2: Outlays are appropriated on an annual basis, and information on total project costs is included in the budget documentation. - 3: Outlays are appropriated on an annual basis and information on total project costs, and multiyear commitments is included in the budget documentation. - 8.b. Are in-year transfers of appropriations (virement) from capital to current spending prevented? - 1: There are no limitations on virement from capital to current spending. - 2: The finance ministry may approve virement from capital to current spending. - 3: Virement from capital to current spending requires the approval of the legislature. - 8.c Is the completion of ongoing projects given priority over starting new projects? - 1: There is no mechanism in place to protect funding of ongoing projects. - 2: There is a mechanism to protect funding for ongoing projects in the annual budget. - 3: There is a mechanism to protect funding for ongoing projects in the annual budget and over the medium term. - 9. Maintenance Funding: Are routine maintenance and major improvements receiving adequate funding? - 9.a. Is there a standard methodology for estimating routine maintenance needs and budget funding? - 1: There is no standard methodology for determining the needs for routine maintenance. - 2: There is a standard methodology for determining the needs for routine maintenance and its cost. - 3: There is a standard methodology for determining the needs for routine maintenance and its cost, and the appropriate amounts are generally allocated in the budget. - 9.b. Is there a standard methodology for determining major improvements (e.g. renovations, reconstructions, enlargements) to existing assets, and are they included in national and sectoral investment plans? - 1: There is no standard methodology for determining major improvements, and they are not included in national or sectoral plans. - 2: There is a standard methodology for determining major improvements, but they are not included in national or sectoral plans. - 3: There is a standard methodology for determining major improvements, and they are included in national or sectoral plans. - 9.c. Can expenditures relating to routine maintenance and major improvements be identified in the budget? - 1: Routine maintenance and major improvements are not systematically identified in the budget. - 2: Routine maintenance and major improvements are systematically identified in the budget. - 3: Routine maintenance and major improvements are systematically identified in the budget, and are reported. *IMF | Technical Report — excerpt from content unit 1pakea2023002* ### 10. Project Selection: Are there institutions and procedures in place to guide project selection? ### 10. Project Selection: Are there institutions and procedures in place to guide project selection? ### Scope and scoring - Indicator Scoring: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent ### 10.a Central review of major project appraisals - Question: Does the government undertake a central review of major project appraisals before decisions are taken to include projects in the budget? - Response options preserved exactly: - Major projects (including donor- or PPP-funded) are not reviewed by a central ministry prior to inclusion in the budget. - Major projects (including donor- or PPP-funded) are reviewed by a central ministry prior to inclusion in the budget. - All major projects (including donor- or PPP-funded) are scrutinized by a central ministry, with input from an independent agency or experts prior to inclusion in the budget. ### 10.b Published criteria and required process for project selection - Question: Does the government publish and adhere to standard criteria, and stipulate a required process for project selection? - Response options preserved exactly: - There are no published criteria or a required process for project selection. - There are published criteria for project selection, but projects can be selected without going through the required process. - There are published criteria for project selection, and generally projects are selected through the required process. ### 10.c Pipeline of appraised investment projects - Question: Does the government maintain a pipeline of appraised investment projects for inclusion in the annual budget? - Response options preserved exactly: - The government does not maintain a pipeline of appraised investment projects. - The government maintains a pipeline of appraised investment projects but other projects may be selected for financing through the annual budget. - The government maintains a comprehensive pipeline of appraised investment projects, which is used for selecting projects for inclusion in the annual budget, and over the medium term. --- ### C. Delivering Productive and Durable Public Assets — Procurement (11) ### Scope and scoring - Indicator Scoring: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent ### 11.a Competitive, open, and transparent procurement - Question: Is the procurement process for major capital projects open and transparent? - Response options preserved exactly: - Few major projects are tendered in a competitive process, and the public has limited access to procurement information. - Many major projects are tendered in a competitive process, but the public has only limited access to procurement information. - Most major projects are tendered in a competitive process, and the public has access to complete, reliable and timely procurement information. ### 11.b Procurement monitoring system - Question: Is there a system in place to ensure that procurement is monitored adequately? - Response options preserved exactly: - There is no procurement database, or the information is incomplete or not timely for most phases of the procurement process. - There is a procurement database with reasonably complete information, but no standard analytical reports are produced from the database. - There is a procurement database with reasonably complete information, and standard analytical reports are produced to support a formal monitoring system. ### 11.c Procurement complaints review - Question: Are procurement complaints review processes conducted in a fair and timely manner? - Response options preserved exactly: - Procurement complaints are not reviewed by an independent body. - Procurement complaints are reviewed by an independent body, but the recommendations of this body are not produced on a timely basis, nor published, nor rigorously enforced. - Procurement complaints are reviewed by an independent body whose recommendations are timely, published, and rigorously enforced. --- ### 12. Availability of Funding: Is financing for capital spending made available in a timely manner? ### Scope and scoring - Indicator Scoring: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent ### 12.a Cash-flow forecasts and commitment ceilings - Question: Are ministries/agencies able to plan and commit expenditure on capital projects in advance on the basis of reliable cash-flow forecasts? - Response options preserved exactly: - Cash-flow forecasts are not prepared or updated regularly, and ministries/agencies are not provided with commitment ceilings in a timely manner. - Cash-flow forecasts are prepared or updated quarterly, and ministries/agencies are provided with commitment ceilings at least a quarter in advance. - Cash-flow forecasts are prepared or updated monthly, and ministries/agencies are provided with commitment ceilings for the full fiscal year. ### 12.b Timeliness of cash release for project outlays - Question: Is cash for project outlays released in a timely manner? - Response options preserved exactly: - The financing of project outlays is frequently subject to cash rationing. - Cash for project outlays is sometimes released with delays. - Cash for project outlays is normally released in a timely manner, based on the appropriation. ### 12.c Integration of external (donor) funding - Question: Is external (donor) funding of capital projects fully integrated into the main government bank account structure? - Response options preserved exactly: - External financing is largely held in commercial bank accounts outside the central bank. - External financing is held at the central bank, but is not part of the main government bank account structure. - External financing is fully integrated into the main government bank account structure. --- ### 13. Portfolio Management and Oversight: Is adequate oversight exercised over implementation of the entire public investment portfolio? ### Scope and scoring - Indicator Scoring: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent ### 13.a Monitoring during implementation - Question: Are major capital projects subject to monitoring during project implementation? - Response options preserved exactly: - Most major capital projects are not monitored during project implementation. - For most major projects, annual project costs, as well as physical progress, are monitored during project implementation. - For all major projects, total project costs, as well as physical progress, are centrally monitored during project implementation. ### 13.b Re-allocation of funds between projects - Question: Can funds be re-allocated between investment projects during implementation? - Response options preserved exactly: - Funds cannot be re-allocated between projects during implementation. - Funds can be reallocated between projects during implementation, but not using systematic monitoring and transparent procedures. - Funds can be re-allocated between projects during implementation, using systematic monitoring and transparent procedures. ### 13.c Ex post reviews and adjustment of policies - Question: Does the government adjust project implementation policies and procedures by systematically conducting ex post reviews of projects that have completed their construction phase? - Response options preserved exactly: - Ex post reviews of major projects are neither systematically required, nor frequently conducted. - Ex post reviews of major projects, focusing on project costs, deliverables and outputs, are sometimes conducted. - Ex post reviews of major projects focusing on project costs, deliverables, and outputs are conducted regularly by an independent entity or experts, and are used to adjust project implementation policies and procedures. --- ### 14. Management of Project Implementation: Are capital projects well managed and controlled during the execution stage? ### Scope and scoring - Indicator Scoring: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent ### 14.a Project management arrangements in ministries/agencies - Question: Do ministries/agencies have effective project management arrangements in place? - Response options preserved exactly: - Ministries/agencies do not systematically identify senior responsible officers for major investment projects, and implementation plans are not prepared prior to budget approval. - Ministries/agencies systematically identify senior responsible officers for major investment projects, but implementation plans are not prepared prior to budget approval. - Ministries/agencies systematically identify senior responsible officers for major investment projects, and implementation plans are prepared prior to budget approval. ### 14.b Rules and procedures for project adjustments - Question: Has the government issued rules, procedures and guidelines for project adjustments that are applied systematically across all major projects? - Response options preserved exactly: - There are no standardized rules and procedures for project adjustments. - For major projects, there are standardized rules and procedures for project adjustments, but do not include, if required, a fundamental review and reappraisal of a project’s rationale, costs, and expected outputs. - For all projects, there are standardized rules and procedures for project adjustments and, if required, include a fundamental review of the project’s rationale, costs, and expected outputs. ### 14.c Ex post external audits - Question: Are ex post audits of capital projects routinely undertaken? - Response options preserved exactly: - Major capital projects are usually not subject to ex post external audits. - Some major capital projects are subject to ex post external audit, information on which is published by the external auditor. - Most major capital projects are subject to ex post external audit information on which is regularly published and scrutinized by the legislature. --- ### 15. Monitoring of Public Assets: Is the value of assets properly accounted for and reported in financial statements? ### Scope and scoring - Indicator Scoring: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent ### 15.a Asset registers and surveys - Question: Are asset registers updated by surveys of the stocks, values, and conditions of public assets regularly? - Response options preserved exactly: - Asset registers are neither comprehensive nor updated regularly. - Asset registers are either comprehensive or updated regularly at reasonable intervals. - Asset registers are comprehensive and updated regularly at reasonable intervals. ### 15.b Recording of nonfinancial asset values - Question: Are nonfinancial asset values recorded in the government financial accounts? - Response options preserved exactly: - Government financial accounts do not include the value of non- financial assets. - Government financial accounts include the value of some non- financial assets, which are revalued irregularly. - Government financial accounts include the value of most nonfinancial assets, which are revalued regularly. ### 15.c Depreciation of fixed assets in operating statements - Question: Is the depreciation of fixed assets captured in the government’s operating statements? - Response options preserved exactly: - The depreciation of fixed assets is not recorded in operating statements. - The depreciation of fixed assets is recorded in operating statements, based on statistical estimates. - The depreciation of fixed assets is recorded in operating expenditures, based on asset-specific assumptions. --- ### Cross-cutting issues (applies across sections 10–15) - A IT support. Is there a comprehensive computerized information system for public investment projects to support decision making and monitoring? - B Legal Framework. Is there a legal and regulatory framework that supports institutional arrangements, mandates, coverage, procedures, standards and accountability for effective PIM? - C Staff capacity. Does staff capacity (number of staff and/or their knowledge, skills, and experience) and clarity of roles and responsibilities support effective institutions? --- ### Annex 3. C-PIMA Questionnaire — Climate-aware public investment (C1–C5) ### Scope and scoring - Indicator Scoring: 1 = To no or a lesser extent 2 = To some extent 3 = To a greater extent ### C1. Climate-aware planning - C.1.a Alignment with NDC or other climate strategies: - Options preserved exactly: - National and sectoral public investment strategies and plans are not consistent with NDC or other overarching climate change strategy. - National public investment strategies and plans are consistent with NDC or other overarching climate change strategy for some sectors. - National and sectoral public investment strategies and plans are consistent with NDC or other overarching climate change strategy for most sectors. - C.1.b Spatial, urban planning and building codes addressing climate risks: - Options preserved exactly: - Central government and/or sub-national government regulations on spatial and urban planning, and construction do not address climate-related risks and impacts on public investment. - Central government and/or sub-national government regulations on spatial and urban planning, or construction (through building codes) addresses climate-related risks and impacts on public investment. - Central government and/or sub-national government regulations on spatial and urban planning, and construction (through building codes) address climate-related risks and impacts on public investment. - C.1.c Centralized guidance for climate-aware investment strategies: - Options preserved exactly: - There is no centralized guidance/support for government agencies on the preparation and costing of climate-aware public investment strategies. - There is centralized guidance/support for government agencies on the preparation of climate-aware public investment strategies. - There is centralized guidance/support for government agencies on the preparation and costing of climate-aware public investment strategies. ### C2. Coordination between entities (climate perspective) - C.2.a Central government coordination on climate-aware public investment: - Options preserved exactly: - Decision making on public investment is not coordinated across central government from a climate-change perspective. - Decision making on public investment is coordinated across budgetary central government from a climate-change perspective. - Decision making on public investment is coordinated across all central government, including externally financed projects, PPPs and extra-budgetary entities, from a climate-change perspective. - C.2.b Coordination with SNGs (sub-national governments): - Options preserved exactly: - The planning and implementation of capital spending of SNGs is not coordinated with the central government from a climate-change perspective. - The central government issues guidance on the planning and implementation of capital spending from a climate-change perspective and information on major climate-related projects of SNGs is shared with the central government and is published alongside data on central government projects. - The central government issues guidance on the planning and implementation of capital spending from a climate-change perspective, information on major climate-related projects of SNGs is shared with the central government and is published alongside data on central government projects, and there are formal discussions between central government and SNGs on the planning and implementation of climate-related investments. - C.2.c Oversight of public corporations’ climate investments: - Options preserved exactly: - The regulatory and oversight framework for public corporations does not promote consistency between their climate-related investments and national climate policies and guidelines. - The regulatory and oversight framework for public corporations promotes consistency between their climate-related investments and national climate policies and guidelines. - The regulatory and oversight framework for public corporations requires that their climate-related investments be consistent with national climate policies and guidelines. ### C3. Project appraisal and selection — climate-related analysis - C.3.a Requirement for climate-related analysis in appraisals: - Options preserved exactly: - The appraisal of major infrastructure projects does not require climate-related analysis to be conducted according to a standard methodology. - The appraisal of major infrastructure projects requires climate-related analysis to be conducted according to a standard methodology. - The appraisal of major infrastructure projects requires climate-related analysis to be conducted according to a standard methodology, and a summary of appraisals is published or subject to independent external review. - C.3.b PPPs and long-term contracts addressing climate challenges: - Options preserved exactly: - The referred framework does not include explicit consideration of climate change for risk allocation or contract management. - The referred framework includes explicit consideration of climate change with respect to how risks are allocated between the parties in infrastructure contracts. - The referred framework includes explicit consideration of climate change with respect to how risks are allocated between the parties in infrastructure contracts, and contract managers in government departments and agencies are mandated to address climate-related challenges. - C.3.c Inclusion of climate elements among project selection criteria: - Options preserved exactly: - Either there are no explicit selection criteria or climate-related elements are not included among the criteria used by the government for the selection of projects for financing. - Climate-related elements are included among the criteria used by the government for the selection of all major budget-funded projects, and the criteria are published. - Climate-related elements are included among the criteria used by the government for the selection of all major projects, including externally financed projects, projects financed by extra-budgetary entities, and PPPs, and the criteria are published. ### C4. Budgeting and portfolio management for climate-related investments - C.4.a Identification, monitoring and reporting in the budget: - Options preserved exactly: - Planned climate-related public investment expenditure are not identified in the budget and related documents. - Some planned climate-related public investment expenditure are identified in the budget and related documents, including investment expenditure funded externally, by extra-budgetary entities, and PPPs. - Most planned climate-related public investment expenditure, sources of financing, and outputs and outcomes are identified in the budget and related documents, including investment expenditure funded externally, by extra-budgetary entities, and PPPs, and expenditure on these projects is monitored and reported. - C.4.b Ex-post reviews or audits of climate outcomes: - Options preserved exactly: - No ex-post reviews or audits are conducted of the climate change mitigation and adaptation outcomes of public investments. - Ex-post reviews or audits are conducted for selected major public investments of either the climate change mitigation or adaptation outcomes. - Ex-post reviews or audits are conducted and published for selected major public investments of both the climate change mitigation and adaptation outcomes. - C.4.c Asset management and maintenance addressing climate risks: - Options preserved exactly: - Neither the government’s asset management policies and practices nor methodologies for estimating the maintenance needs of climate change-exposed infrastructure assets address climate-related risks. - Methodologies prepared by the government for estimating the maintenance needs of some climate change-exposed infrastructure assets address climate-related risks. - Methodologies prepared by the government for estimating the maintenance needs and associated costs of most climate change-exposed infrastructure assets address climate-related risks, and government asset registers include climate-related information of these assets. ### C5. Risk management — fiscal risks from climate change and infrastructure - C.5.a National disaster risk management strategy - Options preserved exactly: - Either there is no published national disaster risk management strategy, or the strategy does not identify the key climate-related risks to public infrastructure assets and networks. - The government publishes a national disaster risk management strategy that identifies the key climate-related risks to public infrastructure assets and networks in terms of hazards, exposure, and vulnerability. - The government publishes a national disaster risk management strategy that identifies and analyses the key climate-related risks to public infrastructure assets and networks in terms of hazards, exposure and vulnerability, and includes the government’s plans to mitigate and respond to these risks. - C.5.b Ex ante financing mechanisms for climate-related damages - Options preserved exactly: - The government has not put in place any ex-ante financing mechanisms to manage the exposure of the stock of public infrastructure to climate-related risks. - There is an annual contingency appropriation in the budget or other financing mechanisms that is available to meet the costs of climate-related damages to public infrastructure. - There is an annual contingency appropriation in the budget and other financing mechanisms that are available to meet the costs of climate-related damages to public infrastructure. - C.5.c Fiscal risk analysis incorporating climate-related risks - Options preserved exactly: - The government does not conduct a fiscal risk analysis that incorporates climate-related risks to public infrastructure assets. - The government conducts and publishes a fiscal risk analysis that incorporates a qualitative assessment of climate-related risks to public infrastructure assets over the medium term. - The government conducts and publishes a fiscal risk analysis that incorporates a quantitative assessment of climate-related risks to public infrastructure assets over the medium term and policies to mitigate these risks, and a qualitative assessment of the risks that may arise over the long-term. ### Cross-cutting issues (climate annex) - A IT support. Is there a comprehensive computerized information system for public investment projects to support decision making and monitoring? - B Legal Framework. Is there a legal and regulatory framework that supports institutional arrangements, mandates, coverage, standards and accountability for effective PIM? - C Staff capacity. Does staff capacity (number of staff and/or their knowledge, skills, and experience) and clarity of roles and responsibilities support effective institutions? *Source: 10. Project Selection: Are there institutions and procedures in place to guide project selection? (1pakea2023002 - 10.)* --- _Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1pakea2023002.pdf_