Page 54 - CMA Journal (May-Jun 2026)

F oc us S ec t ion

For AI-driven nancial management, this means the
foundational data is still fragm ented, and audit Case Study: Frontier Transformation in AI Driven Fiscal Governance
processes would need to operate in a weak oversight
environment. While the demand for real time scal intelligence is universal, no country has achieved fully autonomous scal
Regional comparison also shows divergent trends, governance. Instead, global leaders are undergoing a Frontier Transformation—a hybrid approach where
with countries like Pakistan and Sri Lanka having targeted, high impact AI applications augment strong digital foundations. This evolution balances technical
successfully enhanced budget transparency (OBI) innovation with institutional oversight, showing that modular, domain speci c systems can serve as a blueprint
while simultaneously experiencing signi cant declines for developing economies like Pakistan.
in institutional and audit oversight mechanisms. While Global Practices:
For decades Public Financial Management operated record data but do not generate insight. The next nations like Bangladesh and China exhibit relative
with a reactive logic. Auditors reviewed spreadsheets frontier is intelligence. Systems must move beyond stagnation across all governance metrics, others are • South Korea’s dBrain+ demonstrates the value of a uni ed scal backbone that integrates budgeting,
months after transactions, inspectors agged issues recording to anticipating risks, agging anomalies in grappling with the trade-o s between increased treasury, accounting, and reporting.
long after funds were spent, and fraud detection real time, and transforming oversight from reactive public information and weakening internal • Estonia’s X Road highlights secure interoperability across government systems without centralization.
became a post-mortem exercise that assigned blame review to proactive scal governance. accountability structures. • Singapore’s GovTech and AGO analytics show the shift from sample based audits to continuous, popula-
but did not prevent leakage. In 2024, global public tion level assurance.
debt reached 102 trillion dollars, with developing Fiscal Transparency
countries carrying 31 trillion. These nations paid a Fiscal transparency means openly publishing • Australia’s ANAO framework embeds algorithm accountability into audit processes.
record 921 billion dollars in interest, draining scal complete, reliable, and timely information on • Greece’s myDATA enforces real time legal reporting.
space and threatening essential public services. When government revenues, expenditures, and nancial
every misplaced dollar adds to borrowing costs, obligations to strengthen accountability and support • EU’s ARACHNE and Brazil’s GRAS use predictive analytics to detect fraud and scal leakage before funds are
waiting for an annual audit is no longer an option. informed decisions. It is a cornerstone of sound public lost.

The International Monetary Fund has pointed to weak nancial management, emphasizing clarity, timeliness, • France’s AI enabled warning system identi es municipalities at risk and supports corrective measures.
systems marked by poor data quality, outdated reliability, and accessibility of scal data. Transparency Lessons for Pakistan: These experiences reveal that successful scal governance reform is not primarily a
structures, and lack of real-time monitoring. Digital extends beyond nancial reporting to include technology challenge but a governance and integration challenge. Leaders achieved results by rst establishing
transformation is reshaping GovTech into core public budgeting, scal risk management, and citizen access interoperable scal data architectures, standardized reporting frameworks, real time information ows, and
infrastructure that in uences resource allocation, to information. In developing economies such as strong accountability mechanisms. AI then functions as an enabling layer—transforming oversight into proac-
contract oversight, and audit targeting. Yet Pakistan, implementation remains uneven due to This shift from retrospective auditing to proactive prioritize foundational integration and real-time scal tive risk management.
digitalization alone does not ensure transparency. The institutional limitations, technical capacity gaps, and On the other hand, Pakistan ranks 81st out of 195 prevention requires integrated scal data systems intelligence before advanced analytics. The experience For Pakistan, the implication is clear: without integrated data systems and institutional reforms, AI risks
2025 GTMI report shows that while 193 countries have weak enforcement. countries in the 2025 Government AI Readiness Index, Quantifying the Cost of Fiscal Risk and capable of instant anomaly detection and predictive of smaller agile economies shows that strategic automating ine ciencies rather than improving accountability. The recurring issues of procurement irregulari-
adopted Financial Management Information Systems, placing it in the lower tier globally. Pakistan is among Implementation Gap alerts, ensuring risks are addressed before they coordination, not higher spending alone, is the ties, audit failures, circular debt, and SOE losses should be seen as symptoms of a broader scal intelligence gap.
only 30 percent publish reliable data on system use, Current Fiscal Transparency Measures It creates a critical disconnect where increased data FRMF have been established to monitor PPP liabilities, nations making progress, but it lacks the dedicated AI escalate into crises. decisive factor for AI-driven scal governance. Bridging this gap requires moving beyond digitization toward intelligence—embedding AI into scal work-
Treasury Single Account operations, or budget and Status disclosure is not yet translating into improved reliance on periodic, manual risk analyses limits the It is therefore unsurprising that cases of nancial Pakistan's Performance in AI Readiness funding, compute infrastructure, and cross-sector The Statement of Fiscal Risks FY2026-27 quanti es Global Standing and Practices by Conclusion ows only after governance foundations are secured.
major scal risks that could collectively widen
outcomes. Pakistan’s GovTech Maturity Index (GTMI) Pakistan's public nancial management (PFM) institutional accountability or real-time scal government's predictive capacity and necessitates the irregularities, embezzlement, and corruption, running and Fiscal Transparency coordination seen in top-ranked countries. Without Pakistan's scal de cit by up to 4.3% to 5.8% of GDP. Frontier Leaders Pakistan’s progress in the GovTech Maturity Index and
score of 0.679 is above the global average of 0.589, landscape is currently characterized by a fundamental oversight. urgent integration of AI-based early-warning systems. into trillions of rupees, continue to surface year after parallel improvements in data quality and institutional However, these risks are currently monitored through Global AI adoption rankings highlight the urgency of Open Budget Index con rms that reform momentum International success in AI-enabl
showing progress but also exposing gaps in tension between growing digital adoption and The current status of the Fiscal Transparency landscape Pakistan has made notable progress in scal year. Pakistan’s Open Budget Index (OBI) score rose from 30 oversight, AI will remain a technical add-on rather than periodic reporting and retrospective oversight rather Pakistan’s scal transformation. Leaders like the UAE is already underway. from integrating data, institut
governance intelligence, as shown in Table 1. to 45 between 2023 and 2025, marking meaningful a transformative tool for nancial accountability. and Singapore achieved 63–70% adoption through The central policy question is no longer whether decision-making rather than higher spending alone. • OECD: OECD (2019), Budgeting and Public Expenditures in OECD Countries
2019, OECD Publishing,Paris,https://doi.org/10.1787/9789264307957-en.
persistent systemic fragmentation. Several initiatives shows transparency, publishing the Governance and Pakistan’s public nancial management failures are progress in scal transparency. However, this score than integrated real-time systems. This analysis PEFA:https://www.pefa.org/sites/pefa/ les/200225%20PEFA%20Handbook
%20Vol%20II_v2.pdf
The challenge lies in integration. Many systems remain demonstrate a commitment to modernization, but the 1. Transparency vs. Accountability: While there is a Corruption Diagnostic and UNCAC review reports, systemic rather than isolated. The Rs. 376 trillion “typo” remains low in absolute terms, meaning most budget Furthermore, in terms of government readiness demonstrates how real-time AI-driven scal centralized strategies, interoperable data systems, and Paki
and technological building blocks, the remaining
fragmented, paper-based, or dependent on manual underlying governance architecture remains largely measurable strength in the increased publication of mandating digital asset declarations, and expanding e scandal exposed the absence of a uni ed scal data information is still not fully public or towards AI, South Asian peers India and China score far governance directly addresses each identi ed risk by direct integration of AI into nancial management.
Pakistan, ranked 92nd with only 11.4% adoption, must
workarounds, creating islands of digitalization that reactive and retrospective. procurement systems. In 2026, the Ministry of Finance higher, indicating stronger scal governance systems, enabling continuous monitoring, early warning, and AI-driven intelligence into its existing reform agenda. than legislation. Real-time AI is not a luxury; it is a • https://internationalbudget.org/open-budget-survey/country-results/
2025/pakistan
scal reports and asset disclosures, the landscape architecture, while massive procurement irregularities machine-readable. whereas Pakistan, Bangladesh, and Sri Lanka cluster at proactive mitigation. • https://oxfordinsights.com/ai-readiness/government-ai-readiness-index-
su ers from a weakness in prioritizing disclosure over introduced a Fiscal Risk Monitoring Framework for PPP and healthcare audit fraud revealed weak cost-control the bottom with scores between 45–48. practical tool for improving scal discipline, reducing 2025/
leakage, and strengthening accountability. By
actual accountability, further hampered by limited projects, disclosing Rs. 472.3 billion in liabilities and systems. Audit enforcement remains ine ective, with The comparative scal risk statements for 2025-26 and embedding AI into current initiatives, Pakistan can • https://www.imf.org/en/publications/cr/issues/2025/12/11/pakistan-
second-review-under-the-extended-arrangement-under-the-extended-fun
2026-27 show a worsening risk pro le, with tax
citizen-friendly reporting. guarantees, with plans for a national dashboard to 75 percent of recommendations unimplemented due Pakistan’s Performance Gap Indenti ed transform its system from one that reacts to problems d-facility-572472
strengthen oversight. However, gaps remain: no expenditures rising from 0.16% to 1.30% of GDP, • https://www.brecorder.com/news/40400446/public-private-partnership-
govt-unveils- rst-ever- scal-risk-monitoring-framework
2. Digital Fragmentation: Although digital updated PEFA assessment since 2012, an Open Budget to the lack of real-time oversight. This gap contributes • Without synchronized improvements in legislative re nancing risk from 0.04% to 0.80%, and oil price into one that anticipates risks before they escalate into • https://agp.gov.pk/AuditReports
governance systems like e-PADS have expanded, the Index score stuck at 45/100 with missing citizen. to mounting losses in state-owned enterprises and the and audit oversight vulnerability doubling to 0.80%. Together, these risks scal crises. • https://www.dawn.com/news/1942326
data remains trapped in "islands of digitalization" that unchecked growth of circular debt, now at Rs. 5.2 • Gains in transparency alone may be insu cient to represent potential losses of over 4–5% of GDP. While References • https://www.dawn.com/news/1933514
• https://taxhelplines.com.pk/news_detaill?id=637
lack integration, creating a signi cant gap for a Focused documents and audit reports published with trillion. Development spending is also chronically foster long-term institutional accountability. government strategies—tax base broadening, • https://unctad.org/publication/world-of-debt • https://www.dawn.com/news/1957018
centralized, AI-enabled, real-time scal data platform. long delays, limited accessibility, and weak follow up, underutilized, re ecting manual and fragmented expenditure e ciency, debt management, SOE • https://www.imf.org/en/capacity-development/training/icdtc/schedule/sa • https://tribune.com.pk/story/2570479/irregularities-unearthed-in-
with only about 25 percent of recommendations monitoring. Collectively, these cases show that • Wide gap in Governance Readiness Index between reforms, and tighter guarantee oversight—are sound /2021/pfmsa21-33v healthcare-audit
3. Audit Inertia: Despite broad institutional coverage, implemented. Pakistan’s core scal challenge is the absence of Pakistan and leading Asian countries in principle, they remain periodic and reactive, relying • Gamkrelidze, D., & JAPARIDZE, D. (2025). Harnessing Digital Transformation • https://www.nation.com.pk/16-May-2026/pakistan-s-power-gas-circular-
debt-surges-rs5-20tr
for E cient Public Financial Management and Governance. Ecoforum
the audit function remains stuck in a cycle of delayed, In the IMF's November 2025 Governance and integrated, real-time intelligence, underscoring the on annual cycles and post-facto audits. Real-time Journal, 14(1). • https://www.brecorder.com/news/40402483
retrospective reporting and poor implementation of Corruption Diagnostic Report, several issues were need to shift from retrospective auditing toward • De ciencies in transparency, audit mechanisms, or AI-driven scal governance o ers a transformative • https://www.pempal.org/sites/default/ les/2026-01/World%20Bank%20- • https://www.dawn.com/news/1961941
%20Global%20and%20ECA%20Trends%20in%20Digital%20Transformatio
• https://www. nance.gov.pk/budget/budget_2026_27/Annual_Budget_
recommendations, highlighting the absence of identi ed, including that weak audit and oversight AI-driven continuous scal governance. governance frameworks alternative, embedding continuous intelligence into n%20of%20Public%20Finance.pdf Statement.pdf
continuous auditing and AI-based anomaly detection. structures place approximately Rs 40 trillion in federal • Need for structural reforms. revenue forecasting, debt monitoring, SOE oversight, • https://datacatalog.worldbank.orgsearch/dataset/0037889/govtech-datase • https://www. nance.gov.pk/budget/budget_2025_26/abs_eng_10062025
• IMF De nation https://www.imf.org/external/np/fad/trans/Code2019.pdf
.pdf
4. Predictive De ciency: While frameworks like the public funds at signi cant duciary risk. and risk modeling. • World Bank • https://www.visualcapitalist.com/mapped-ai-adoption-by-country-in-2026
• https://cfrr.worldbank.org/sites/default/ les/2025-06/Good%20Practices
52 ICMA’s Chartered Management Accountant, May-Jun 2026