Article 78 of Pakistan’s constitution states that all revenues received by the federal government, all loans raised by it, and all monies received in repayment of loans shall form part of the Federal Consolidated Fund. Similar provisions exist for provincial governments under Article 118. The constitutional principle is therefore straightforward: public money belongs to the public treasury.
The practical reality, however, is considerably more complicated. Public money does not sit in a single place waiting to be consolidated. It is held by ministries, regulators, authorities, universities, funds and autonomous bodies, each with its own legal mandate, board structure, spending needs and banking arrangements. Many of these institutions treat their bank balances not merely as idle cash but as working liquidity, contingency cover or a source of investment income. Commercial banks also benefit from these deposits.
Bringing such balances into the Treasury Single Account (TSA) therefore affects institutional autonomy, operational flexibility and banking sector liquidity. This is why TSA reform is not simply a matter of issuing a notification. It requires careful sequencing, reliable payment systems, credible assurance that entities will have timely access to funds, and incentive arrangements for institutions that currently rely on deposit returns.
The recent expansion of the TSA framework has brought hundreds of federal entities under a consolidated cash management arrangement. More institutions are expected to follow. International financial institutions have long advocated such reforms, and the underlying economic logic appears compelling. Governments should know where their money is, idle balances should be minimised and unnecessary borrowing should be avoided.
Yet the implementation of Treasury Single Accounts remains one of the most difficult public financial management reforms anywhere in the world. Pakistan is unlikely to be an exception.
The case for TSA appears obvious. Governments frequently borrow while substantial public balances remain scattered across ministries, authorities, autonomous bodies and public entities. One institution may hold large idle balances while another part of the government faces cash shortages. Commercial banks earn returns on public deposits while governments simultaneously issue debt at much higher interest rates.
International organisations have repeatedly identified this contradiction. The IMF considers TSA a prerequisite for modern cash management because it provides the government with a consolidated view of its own resources. The World Bank similarly argues that fragmented government banking arrangements weaken cash management, increase borrowing costs and reduce fiscal transparency.
However, the operational reality is considerably more complex. Many autonomous bodies and public authorities in Pakistan maintain substantial balances in commercial banks. These balances often generate investment income that supports operational expenditures, maintenance activities and institutional functions. From the perspective of such institutions, surrendering these balances to the treasury may appear equivalent to surrendering financial autonomy.
The concern is not entirely irrational. If an authority deposits funds in a commercial bank and earns returns linked to prevailing interest rates, it may rely upon these earnings to finance part of its operations. Bringing these balances into a Treasury Single Account changes those incentives. Institutions may reasonably ask whether they will retain access to their resources, whether funds will remain available when required, and whether the returns they currently receive will disappear.
These concerns partly explain why Treasury Single Accounts encounter resistance in many countries.
International experience suggests that the main obstacle to treasury reform is rarely technical. It is institutional. Organisations become accustomed to controlling their own balances, while commercial banks benefit from access to large public deposits. Treasury reform alters these arrangements.
The Nigerian experience is particularly instructive as it showed both the fiscal value and the adjustment costs of TSA. Nigeria began piloting TSA around 2012, covering about 217 ministries, departments and agencies. That pilot reportedly saved around 500 billion nairas in avoidable or frivolous spending. Full implementation was pushed more forcefully in 2015, when federal MDAs were directed to close revenue accounts with commercial banks and transfer balances to the central account at the Central Bank of Nigeria. Estimates at the time suggested that commercial banks could lose around 2 trillion nairas to 2.2 trillion nairas in public-sector deposits. The reform therefore improved cash visibility and financial control, but also created liquidity concerns for banks that had relied on public deposits.
The Nigerian experience demonstrates two important lessons. First, Treasury Single Accounts can improve public financial management. Second, reforms create both winners and losers.
The broader international evidence points in the same direction. A study of 33 OECD countries over 2000–2020 found that TSA arrangements are associated with lower borrowing requirements and borrowing costs. Its estimates suggest that when fiscal deficits increase, borrowing costs rise by about 0.1238 percentage points less in countries using TSA than in countries without TSA. The logic is practical: when governments can see and use their own cash balances more effectively, they need smaller liquidity buffers and can reduce avoidable short-term borrowing.
Importantly, modern Treasury Single Accounts do not necessarily require complete centralisation.
Many countries operate distributed systems in which agencies retain transaction accounts while surplus balances are swept into a central treasury account at the end of the day. Operational autonomy is preserved, while idle cash is consolidated. Pakistan’s recently introduced sweeping arrangements largely follow this model.
This distinction is important because Treasury Single Accounts are often misunderstood as an attempt by finance ministries to seize institutional resources. In practice, the objective is not to centralise spending decisions. It is to centralise cash management.
Pakistan nevertheless faces several additional complications. Public debt management itself remains fragmented across multiple institutions. Different entities manage external borrowing, domestic debt, national savings instruments and other liabilities. Information systems remain fragmented. Data often arrives with delays. Institutional responsibilities overlap. In such an environment, treasury reform becomes part of a much larger agenda involving cash management, debt management and financial information systems.
Capacity constraints further complicate implementation. Modern treasury systems require integrated information systems, reliable cash forecasts, skilled personnel and strong institutional coordination. In many cases, operational challenges rather than legal barriers become the principal constraint.
These realities suggest that treasury reform should proceed pragmatically rather than mechanically.
Institutions that lose investment income may require compensatory arrangements. Transfer pricing mechanisms used in some countries allow treasuries to remunerate institutional balances while still retaining centralised cash management. Large autonomous bodies may require phased integration. Stronger cash forecasting systems and reliable payment arrangements are equally important.
The debate should therefore not be framed as being either for or against Treasury Single Accounts. The more relevant question is how to design a Treasury Single Account that accommodates legitimate operational concerns while improving aggregate cash management.
Pakistan’s recent reforms suggest that this balance may be achievable. The federal Public Finance Management Act of 2019, the subsequent Treasury Single Account Rules, and the public financial management legislation enacted by Punjab, Sindh and Khyber Pakhtunkhwa all emphasise cash management, treasury oversight and stronger financial reporting.
The provincial dimension may ultimately prove particularly important.
Provincial governments increasingly manage substantial resources and maintain significant cash balances. Similar constitutional principles apply to provincial consolidated funds. Extending modern cash management practices to the provinces could improve fiscal coordination, strengthen liquidity management and reduce idle balances across the broader public sector.
However, the federal experience offers an important lesson. Treasury reform cannot succeed through legislation alone. It requires political commitment, institutional coordination, operational flexibility and investment in systems and capacity.
Treasury Single Accounts are neither a magic solution nor merely an administrative exercise. They are a mechanism for ensuring that public money remains visible to the public treasury. The challenge for Pakistan is not whether such a system is desirable. The challenge is operationalising one that works within the realities of its institutions while moving gradually toward the constitutional principle that public resources belong to the consolidated fund.
The writer is a research fellow at the Sustainable Development Policy Institute (SDPI), Islamabad.
