The International Monetary Fund has raised serious concern over Pakistan’s weak audit structure. It has warned that the absence of strong internal and external audit systems exposes public funds to significant risks. These funds, according to the assessment, reach nearly Rs40 trillion at the federal level. Provinces hold even larger amounts. Therefore, the deficiencies pose a massive fiduciary challenge.
The Fund has now urged Pakistan to create a fully independent Office of the Auditor General. This move, it believes, can secure better value for public money and improve transparency. The recommendation appears in a detailed governance review that examines weaknesses in oversight mechanisms.
IMF Flags Gaps in Internal Controls
The governance diagnosis highlights several alarming gaps. Pakistan’s internal controls remain weak, despite legal structures that require strong audit functions. The absence of a functioning internal audit mechanism stands out as a major problem.
The Public Finance Management Act of 2019 required each division to appoint a Chief Internal Auditor. These auditors were supposed to work directly with key accounting officers by 2020. However, this requirement remains unfulfilled. As a result, there is no proper internal audit structure in most ministries.
Although chief finance and accounts officers are present in several federal ministries, the presence of internal auditors is still limited. Even the CFAO positions remain vacant in many divisions. This incomplete implementation weakens the internal oversight process.
Additionally, existing internal audit findings are rarely followed up by ministries. There is inconsistent interest in audit outcomes. Therefore, issues continue to recur without meaningful correction.
External Audit Also Lacks Independence
The Fund has also observed that the Auditor General’s office lacks complete independence. Although the constitution grants autonomy to this office, its administrative attachment to the federal secretariat reduces its freedom. Instead of reporting directly to the parliament, the Auditor General must report through layers of executive authority. This indirect path weakens the credibility of the audit process.
Moreover, the office depends on the federal Public Service Commission to hire staff. According to the assessment, it faces a shortage of about 1,500 employees. Budget execution rules also limit its operations. Even though its budget is classified as charged expenditure, the office must wait for releases from the Finance Division. This dependency delays critical audit work.
These structural weaknesses make it difficult for the Auditor General to exercise full authority. Strong independence is essential for any supreme audit institution. Without it, oversight remains compromised.
Overloaded Audit System Struggles to Produce Impact
Another major concern relates to the sheer volume of audit reports. The Auditor General’s office produces more than 6,000 reports each year. However, only a small fraction receives proper review. This overload makes it impossible for the Public Accounts Committee to handle the backlog.
In fact, the assessment shows that most audit recommendations remain unattended. Nearly 75 percent of the 34,000 recommendations still await discussion. This massive backlog reflects a weak parliamentary oversight system.
Furthermore, many audit reports are excessively long. Some contain thousands of pages. Repetitive findings add unnecessary volume. Because the gaps are not addressed, the same issues reappear year after year. This trend reduces the usefulness of the reports and wastes audit resources.
Additionally, the system lacks effective tracking of executive compliance. There is no centralised mechanism to monitor how ministries respond to audit findings. As a result, accountability remains incomplete. The impact of the audit system therefore remains limited.
Fiduciary Risks Grow With Weak Oversight
Weak internal and external audits expose public finances to major risks. The absence of timely oversight enables corruption, embezzlement, and financial irregularities. Therefore, the cycle of mismanagement continues. Without strong controls, these risks increase each year.
Additionally, the lack of accountability creates a culture of poor financial discipline. Because ministries face little consequence for ignoring audit findings, irregularities continue. This weakens governance and harms public trust. Strong oversight is essential for ensuring responsible use of public resources.
IMF’s Recommendations for Strengthening the System
The IMF has proposed several reforms to address these issues. It wants Pakistan to establish a fully independent Auditor General office. This requires removing administrative links with the federal secretariat. It also requires granting direct reporting rights to parliament.
The Fund also suggests amending regulations governing the Public Accounts Committee. These changes would give the committee stronger powers to enforce compliance. Accountability mechanisms must become mandatory.
Moreover, the Fund advises restructuring audit reports. They should focus on key issues. Clear recommendations should replace repetitive content. Visual tools, such as traffic light indicators, can highlight urgent problems.
In addition, oversight must include a monitoring system for compliance. A centralised secretariat should track how ministries respond to audit findings. This would increase transparency and improve accountability.
The Path Forward
Strengthening audit systems is essential for Pakistan’s financial stability. With trillions of rupees at stake, weak oversight cannot continue. The IMF’s recommendations highlight fundamental governance concerns. Implementing these reforms will require political commitment and administrative effort.
However, the benefits of reform are clear. Strong audit systems can prevent misuse of public funds. They can also build trust and improve financial management. Moreover, improved governance supports economic stability.
Pakistan now faces a critical moment. The need for reform is evident. With the right steps, the country can build a stronger and more reliable audit structure.
