Cash management framework under strain

EDITORIAL: When parliament enacted the Public Finance Management (PFM) Act 2019, it sought to overhaul a deeply fractured fiscal system in line with reform benchmarks set by international lenders, particularly the IMF. Years of weak cash management, scattered financial reporting and unchecked discretion in spending across public entities had eroded transparency and inflated the government’s borrowing needs. The Act sought to impose order through a key reform: consolidating all public funds into a Treasury Single Account (TSA) maintained at the State Bank of Pakistan, bringing state-owned enterprises (SOEs), regulators and autonomous bodies under a unified cash management framework. It aimed at ending the practice of SOEs parking their idle cash balances in commercial banks and required them to route their financial needs through the finance division, enabling tighter oversight and daily reconciliation of public finances. The Senate Standing Committee on Finance’s hearing on April 16 has now revealed that over 200 public entities have collectively parked more than Rs1 trillion in commercial bank accounts instead of in the TSA in clear violation of the law. This goes well beyond mere procedural non-compliance. It is both a failure of enforcement by the finance ministry and a willful disregard for fiscal discipline by the SOEs themselves. The cost of this gross dereliction is considerable: a direct drain on public finances, as funds that should have strengthened the government’s cash position remain fragmented, under-utilised and beyond effective oversight. This breach, in fact, strikes at the very rationale of the PFM Act, which was designed to end the irrational cycle in which the government borrows from commercial banks at high cost, even as sizeable public funds lie idle in those very banks under the control of disparate entities. By consolidating all balances into a single treasury account, the law aimed to optimise cash utilisation, reduce reliance on costly borrowing and bring public spending under rigorous oversight. It also strengthened the finance division’s hand in enforcing budgetary discipline, compelling ministries and SOEs to operate within approved allocations and curbing unauthorised expenditure. Against a backdrop of chronic fiscal deficits, government spending that routinely outpaces revenue collections, a culture of excess that permeates the public sector and a mounting debt burden, the failure to enforce the PFM Act reflects a shocking lack of seriousness within government about the country’s precarious fiscal position, and a continued tolerance for the excesses the reform sought to eliminate. As far back as January 2025, media reports had flagged that a significant 15-20 percent of funds that should have been deposited in the TSA remained parked with commercial banks. And more than a year on, there appears to have been little improvement in this entrenched defiance of the law. A telling example that emerged during the Senate hearing was the Rs1.19 billion spending on perks, privileges, gratuity, and pensions for its staff, by an autonomous body with the finance ministry remaining silent despite audit objections raised by the Auditor General. Whether such spending is justified or excessive is not the immediate point; in the absence of robust oversight, such judgments cannot be made with confidence. What is clear, however, is that such outlays are far more easily executed when funds remain parked in departmental accounts with commercial banks rather than flowing through the TSA, where stricter scrutiny and tighter fiscal controls would have been unavoidable. The finance ministry must now get its act together and enforce full compliance with the PFM Act without exception, compelling all public entities to route their funds through the TSA as mandated. The fiscal framework under the PFM Act was designed as an instrument of discipline, transparency and control, and it must be upheld in both letter and spirit. Copyright Business Recorder, 2026