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Financial management in finance ministry of Pakistan
The Ministry of Finance, also known as Finance Ministry, is a Cabinet-level department of Government of Pakistan concerned with the promoting economic growth and economic activities within the country. The Ministry's executive and political figure head is known as Finance Minister of Pakistan, who must be an elected Member of Parliament of Pakistan. The financial management system of Pakistan's public sector consists of three tiers, i.e. Finance, Accounts and Audit. The Ministry of Finance at the Federal level is the custodian of all revenues and the central agency which disburses the pooled finances to the Provinces. The Federal Ministry of Finance through the Central Board of Revenue collects taxes, both direct and indirect. The Ministry raises local and foreign loans through the banking system, while budgetary deficits are financed using various techniques of financial management. The organizational structure of the Ministry is listed below. The current Minister is Dr. Abdul Hafeez Shaikh, a former World Bank executive.      Revenue Division Finance Division Economic Affairs Division Statistics Division Planning & Development Division

Revenue Division
This division is headed by Secretary, Revenue Division; who usually is an ex-officio Chairman of the Federal Board of Revenue (the supreme tax agency). This division (Federal Board of Revenue) is responsible for: (I) formulation and administration of fiscal policies, (ii) levy and collection of federal taxes and (iii) quasi-judicial function of hearing of appeals.

Finance Division
Finance division includes these departments: Office of the Controller General of Accounts Office of the Auditor General of Pakistan Central Directorate of National Savings (CDNS) Monopoly Control Authority Finance Division Military National Savings Organizations Pakistan Mint Federal Treasury Offices

Securities and Exchange Commission of Pakistan

Statistics Division
The Statistics Division includes these departments: Federal Bureau of Statistics, headquartered in Islamabad Population Census Organization, headquartered in Islamabad Agricultural Census Organization, headquartered in Lahore Planning & Development Division Includes these semi-autonomous organizations: National Fertilizer Development Centre National Logistics Cell Pakistan Institute of Development Economics Pakistan Planning and Management Institute

Economic Affairs Division
The Division is responsible for the coordination of economic relations with other countries and external economic organizations. It contains thirteen wings.

Planning & Development Division
Planning and development division includes these semi-autonomous organizations: National Fertilizer Development Centre National Logistics Cell Pakistan Institute of Development Economics Pakistan Planning and Management Institute

The Finance Division deals with the subjects pertaining to finance of the Federal Government and financial matters affecting the country as a whole, preparation of annual budget statements and supplementary/excess budget statements for the consideration of the parliament accounts and audits of the Federal Government Organization etc. as assigned under the Rules of Business, 1973. The Provincial Finance Departments are also authorized to collect revenues in their respective Provinces in accordance with the individual resource base available to each, and formulate annual budgets in accordance with their particular development and non-development programmes. The Provincial budgetary deficit is met by the Federal Government. The accounts at both Federal and Provincial levels are audited by the Auditor General

The organizational structure of the Finance Division envisages the establishment of a separate but related Budget Wing, Expenditure Wing, External Finance Wing, Internal Finance Wing and Development Wing, each headed by a Joint Secretary. The role of Finance Division is to analyze all proposed financial plans and programmes of government agencies to ensure that they are in accordance with the prescribed national objectives and that the resources are applied in an economical, efficient and effective manner to promote stable economic growth.

In the public sector, the Budget is an instrument by which the Government expresses its priorities and allocates resources to implement its policies. The Budget is a tool by which planned expenditures are controlled, at all levels of Government, including spending ministries, departments and units. Under the Constitution, the Federal/Provincial Government is required annually to lay before the National/Provincial Assembly, a statement of estimated receipts and expenditure for the forthcoming financial year. This is referred to as the Annual Budget Statement. This statement indicates separately the sums required to meet expenditure charged upon the Federal/Provincial Consolidated Fund and other expenditure to be made from the Federal/Provincial Consolidated Fund. The budgeting cycle consists of six phases broadly categorized as follows: y Setting of budget policy and Initiatives:

The Cabinet meets to determine budget policy, initiatives and priorities. These are then communicated to ministries and departments via the Finance Division/Department and Financial Advisors in the case of Federal Government. y Preparation:

This stage includes the preparation and submission of budget estimates of expenditure and receipts by entities and subsequent review and consolidation of estimates by the Financial Advisors (in the case of Federal Government) and the Finance Division/Department. y Authorization:

This stage involves submission of the Annual Budget Statement before the National/Provincial Assembly. This consists of two stages; approval by the National/Provincial Assembly, and authentication by the Prime Minister/Chief Minister. The approved budget is referred to as the µSchedule of Authorized Expenditure¶. y Implementation:

This stage refers to the communication of the budgets to the spending ministries and departments via the Finance Division/Department and the Financial Advisor in the case of Federal

Government. On implementation of the Budget, the entity can carry out activities and incur expenditure, for which funding has been given in that period. y Reporting and monitoring

Actual revenues and expenditures (including commitments) are recorded and reported to monitor progress against budget throughout the financial year. Reporting assists managers in decision making and in particular re-allocation of funds where required. y Review

The periodical review of financial performance and the achievement of policy objectives is done by spending agencies and external review bodies. This includes audit activities and review by Public Accounts Committee. At year end outstanding commitments are reviewed and budget provision (through supplementary grant) made for the following year.

The Federal Ministry of Finance is the agency that controls the public sector finances of Pakistan. The central agencies which assist the Ministry in carrying out its financial management responsibilities are:  CENTRAL BOARD OF REVENUE The Central Board of Revenue is an attached Department of the Ministry and collects all direct and indirect taxes of the Federation through its Commissioners of Income Tax and Collectors of Central Excise and Land Customs based at various locations throughout Pakistan.  AUDITOR GENERAL OF PAKISTAN The Auditor General of Pakistan holds a constitutional position. However, his Department is attached administratively to the Ministry of Finance. The Auditor General of Pakistan compiles, maintains and audits most of the Federal and Provincial Accounts through its field offices headed by the Accountants General and Directors General of Audit.  CENTRAL STATISTICAL ORGANISATION: The role of this organization is to collect all types of statistics for the Federal Ministry of Finance that can be used for fiscal and monetary management of the federation.  NATIONAL SAVINGS ORGANISATION (NSO) The NSO mobilizes public savings for the Federal Government through National Savings Schemes operated by its various savings centers throughout the federation.  PAKISTAN MINT

The Metallic coins of small denomination are minted and circulated in the country by the Pakistan Mint.  STATE BANK OF PAKISTAN The State Bank of Pakistan is an autonomous body working under the overall framework of the Ministry of Finance. The Bank is headed by a Governor who is selected by the Government and is appointed with tenure. The Bank plays a vital role in regulating the monetary policy of the Government.

The State Bank of Pakistan is the central bank which acts as banker to the Federal and Provincial Governments. Each Government maintains its accounts with this bank and all payments on behalf of any Government are made by the bank. The central bank issues currency notes and regulates the money supply of Pakistan. The central bank also keeps control over the scheduled/ commercial banks in the country, both directly and through the Pakistan Banking Council. The central bank declares the daily rate of exchange of Pakistani rupee against other world currencies. The central bank has also some public saving incentive schemes such as Prize Bonds, the draws of which give lucrative prizes periodically. The central bank is the custodian of foreign exchange in Pakistan and is responsible for its effective management. However the foreign exchange restrictions, as imposed in Pakistan over the years have been generally relaxed to promote the mobility of capital. The central bank keeps a watch over the resource position of each government and, in case of emergency, acts as lender of the last resort. The traditional activities of a central bank such as buying and selling of securities, open market operations and the fixing of reserve limits are carried out by the State Bank of Pakistan as central bank.

The Auditor General is responsible for keeping the accounts of the Federation and of the four Provinces. it is the duty of the Auditor General i) to audit all expenditure from the revenues of the Federation and of the Provinces, ii) to audit all transactions of the Federation and of the Provinces relating to debt, deposits, sinking funds, advances, suspense accounts and remittance business, iii) to audit all trading, manufacturing, profit and loss accounts and balance sheets kept in any department of the Federal Government or of a Province; and iv) to audit the accounts of any authority or body established by the Federation or a Province and in each case to report to the President or, as the case may be, to the Governor on the expenditure, transactions or accounts involved. The Auditor General may, with the approval of, and shall if so required by the President or the Governor of any Province, audit and report on a) the receipts of any department of the Federal Government or, as the case may be, of the Province; and b) the accounts of stores

and stock kept in any office or department of the Federal Government or, as the case may be, of the Province. The purpose of audit includes the assurance that "moneys shown in the accounts as having been disbursed were legally available for and applicable to the service or purpose to which they have been applied or charged and whether the expenditure conforms to the authority which governs it". Accordingly the main objectives of audit by the Auditor General are:  To judge and report whether the financial statements of the Government are properly presented;  To see whether the auditees follow the rules and regulations prescribed by the Parliament and the Government;  To reveal violations of authority  To ascertain whether the auditees manage human and material resources with due regard for economy, efficiency and effectiveness.

Balance of payments is a record of economic transactions between the residents of one country and the rest of the world during the course of one year. The items which lead to an inflow of foreign earnings are placed on credit side of the balance sheet, where as the items which give rise to an outflow of foreign currency are placed on the debt side.

Following are the major causes of disequilibrium in balance of payment in developing countries like Pakistan.  Export of Primary or Semi Manufactured goods: Developing countries like Pakistan are exporting primary or semi manufactured goods like cotton and rice. These commodities do not get high prices in the international market. Near about 40% of total earning of foreign exchange is by the export of primary or semi-manufactured goods.  Import of Capital Goods: Developing countries like Pakistan are importing capital goods to industrialize the economy. Due to this reason balance of payment remains unfavorable.  Import Oriented Industries: The imports of industrial raw material in the aggregate import are placed at 50%.  Consumption Oriented Society: Developing countries are mostly consumption oriented. Due to this reason most of the goods which are produced within country are consumed locally. The exportable surplus is on the decline.

 Deterioration in Terms of Trade: In developing counties like Pakistan the import unit values are higher than export unit values. So a decline in terms of trade causes imbalance in the balance of payments.  Unfavorable altitude of Developed Countries: Due to unfavorable altitude of developed countries our balance of payment is unfavorable. For example the developed countries like U.S.A. and U.K. have put many restrictions on imports from Pakistan. They have fixed quotas against the cloth of Pakistan.  Inflation: Due to inflation in developing countries like Pakistan the price of exportable goods are very high. Their goods face difficulties to compete in international market and balance of payment remain unfavorable.  Political Uncertainty: Developing countries like Pakistan are facing political uncertainty which is the main cause of low production as well as balance of payment remain unfavorable.  Devaluation: Devaluation is also cause which increases the deficit in the balance of payment.  Import of Oil and Fertilizer: Import of oil and fertilizer is also cause of deficit in the balance of payment of Pakistan.  Developing Economy: Developing countries like Pakistan is undertaking huge programmes of development of industry, agriculture, transport, education, communication, irrigation and electricity. For this purpose various kinds of raw material and machinery are needed. So balance of payment remains unfavorable.  Repayment of Debt and Interest: Developing countries like Pakistan are paying the debt and interest of the debt which they borrow for development purpose. It is a great burden which affects the balance of payment badly.  Huge Import of Invisible Goods: Due to import of invisible goods the balance of payment remains unfavourable of developing countries like Pakistan.  Variations in Trade: There may be temporary disequilibrium caused by random variations in trade due to seasonal fluctuations, the effects of weather on agriculture production etc. Deficits in balance of payment due to variations in trade are expected to correct with in short time.  Fundamental Disequilibrium: They may arise due to fundamental changes in the economic conditions of a country. They may be due to changes in consumer tastes with in the country or abroad there by affecting the country¶s import or export. Due to this reason balance of payment remains unfavourable.  Technological Changes in Method of Production: Due to this reason in the domestic industries or in the industries of the other countries may affect the country¶s ability to compete in the home or foreign market. This may be due to changes in costs and prices and the quality of products following technological improvement.

 Changes in Country¶s National Income: If the national income of a country increases it will lead to an increase in imports whereby creating a deficit in its balance of payment, other things remaining the same.

The disequilibrium of balance of payments can be corrected in three ways:
1. The foreign earning should be increased by export led growth. 2. The imports should be curtailed to essential items only. 3. The expenditure on invisible imports should be minimized.

Export Led Growth Export plays an important role in the growth of the economy. It is regarded as key factor in the economic development. As regards the developing countries like Pakistan, they have rich manpower and real resources. If they are properly exploited and utilized, there can be significant improvement in exports and foreign exchange earnings. We suggest the following measures to be adopted for increasing exports and alleviating the balance of payments problems.  Promotion of Labor Intensive Industries: Promotion of labor intensive industries should be established because in such countries labor is cheaper. The cheap labor can give a comparative advantage in the production and export of commodities. The export earnings, therefore can increase and help in restring equilibrium in balance of payments problem.  Diversification of exports: The developing countries like Pakistan have been showing heavy concentration on a few primary commodities. If there is a recession in international market for cotton and rice of Nature is not kind, the production declines and exports are greatly reduced and have a damaging effect on the balance of payments. They should therefore diversify their exports and produce value added goods for gaining competitive strength in the international market.  Development of Industries having low capital output ratio: Developing countries like Pakistan with low foreign exchange earning cannot afford to import heavy machinery. If they like Korea, Taiwan, Hong Kong, Singapore, take up lines of production having a low capital output ratio it can lead to fast growing export.  Decrease in Consumption: Inspite of rapid rise in prices there is a greater increase in national consumption of developing countries like Pakistan. The higher consumption of locally manufactured goods is reducing the exportable surplus and consequently the foreign earning to them. The people should be motivated to adopt simple living and austerity for bridging the resource gap.

 Restoration of Sick Industries: The sick industries in the nationalized public sector should be restored and handed over the private sector. The private sector has the capacity to reactivate the dying industrial units and increase the production for use at home. It can thus increase exports to earn the much needed foreign exchange.  Reduction in export duties: Reduction in export duties, publicity of locally manufactured goods in the foreign markets, adequate provision of credit to the private sector for development of industries etc earn greatly help in increasing export earnings and relieving the pressure on balance of payments.  High quality goods: In order to capture foreign markets, it is necessary that high quality goods at minimum cost should be produced.  Pricing of goods: For increasing exports, it is necessary that goods should produce under optimal conditions and offered a competitive price in international market.  Packing: For promoting exports, high quality packing is essential. If packing is not attractive and durable it will not capture foreign markets.  Joint Venture: The exports can also be pushed up by establishing industries with joint ventures of foreign investors. The producers of these industries can be sold in the foreign markets and the country can earn sizeable foreign exchange. Reduction in Imports In order to correct disequilibrium in balance of payment, the governments of developing countries like Pakistan should reduce the import of consumer goods. Similarly raw material which can be produced in the country at a cheaper cost should not be imported. The decline in imports of consumer goods and industrial raw material can greatly reduce the deficit gap. Reduction in Invisible Imports The payments on invisible imports like shipping, insurance, banking, services, payments of technocrat working in various establishments, expenses on diplomats etc are on increase in developing countries like Pakistan. These payments should be curtailed down.

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