Anatomy of a budget

Shahnawaz Ali

Year in year out, Pakistanis talk about the economic problems that are faced by the country. The bulletin is mostly rife with news of default and falling reserves. Not only is it a major driver of the political discourse in the country it is sometimes the entire reason, on which political upheavals are based.

In working democracies, political discourses determine public demand, and public demand brings about legislative measures. Contrarily, Pakistan follows a top down approach, wherein, a party’s political will determines legislative measures and that in turn translates into narrative that’s digested verbatim by the party’s supporters and rejected unanimously by the opposers.

And central to a country’s economic policy is the annual budget. It is in this document that a government decides whether it will increase or decrease its expenditure in a particular sector. The government also projects the revenues that it will collect through taxes and other sources in the budget and it is based on those estimates that the government allocates budgets to different sectors, ministries and provinces.

In essence making a budget is an accounting exercise, with underlying policy objectives. The accounting exercise is divided into 6 essential steps namely, Preparation, Authorization, Execution, Reporting and Monitoring, Review and Policy setting. This sounds a well-rounded approach to tackle the exercise however oftentimes, the miscalculation in the first two steps, renders the last 3 utterly moot.

The annual budget statement (ABS) is the main document for the federal budget. After the preparation and authorization, the ABS makes its way to the senate and eventually to the public. In terms of expenditures, the ABS categorically differentiates between “Receipts” and “Expenditures”.

Revenues/Receipts:

Receipts or revenue consists of balances of all budgetary receipts, e.g. Revenue Receipts, Capital Receipts, External Receipts, Public Account Receipts. These resources constitute federal gross receipts. This means that the provincial share is deducted to arrive at net federal receipts available to finance federal expenditures.

It’s important to note that the distribution of revenue between the federal government and the provinces is guided by the principles laid out in the NFC Award. The award determines the share of each province in the federal revenue pool based on factors such as population, backwardness, revenue generation capacity, and other socio-economic indicators.

Additional resources in reciepts may include privatization proceeds plus credit from the banking sector to finance government expenditures.

Expenditures:

The other part of the ABS is expenditures. Expenditure is broken down into current expenditure and development expenditure and is separately shown for expenditure on Revenue Account and expenditure on in Islamabad. As per details, Shah Mehmood Qureshi was arrested from Gilgit Baltistan House in Islamabad, soon after the riots erupted across Pakistan following the arrest of former prime minister Imran Khan in the Al-Qadir Trust case. Qureshi’s arrest was an addition to the tally as several PTI leaders including former Governor Punjab Omer Sarfraz Cheema, PTI secretary general Asad Umar and PTI Vice President Fawad Chaudhry were already apprehended by police.

Earlier, there were reports that PTI leader Jamshed Cheema had decided to part ways with the party over May 9 violence. According to a video of the counsel for Cheema, he held a meeting with Jamsheed Cheema in jail. “I am confident that he would quit PTI as soon as he comes out of jail,” he said. Cheema’s lawyer further said his client is upset over the attacks on military installations on May 9.

Condemning the re-arrest and “custodial torture” of PTI leaders, workers and supporters, party chief Imran Khan has vowed to “resist till my last breath”.

“The constitution is being brazenly violated along with SC rulings. Police are being used to crush PTI, our leaders forced to quit the party,” he further said in a tweet, adding that “giving into this cruelty means the death of our nation”. STAFF REPORT

The prime minister also directed the authorities concerned to finalise pension reforms at the earliest and establish a pension fund through adopting creative methods to lessen the burden on the national treasury to ensure welfare of the pensioners.

Ambassador Durrani appointed special envoy on Afghanistan

ISLAMABAD MIAN ABRAR

Former Ambassador Asif Ali Durrani on Tuesday was appointed as special representative of Pakistan on Afghanistan. The announcement came after a lapse of around two months when former special envoy on Afghanistan, Mr Mohammad Sadiq, resigned. A notification on the new appointment reads: “The Prime Minister has been pleased to approve the appointment of Ambassador (retd) Asif Ali Khan Durrani as Special Representative on Afghanistan with immediate effect.”

Capital Account. Expenditure on Revenue Account signifies that portion of expenditure which is met from resources such as tax revenue and receipts, whereas expenditure on Capital Account refers to expenditure which is financed from loans, finances, credits, grants, and other borrowings. The biggest current expenditures on the revenue account that Pakistan incurs are General Public Service and Defense affairs and services. The General Public Service mainly inculcates the servicing of domestic and foreign debt. Apart from that it includes administrative and research expenditures of “General Public Service”. Collectively these two expenses were budgeted at 6.7 trillion in the 2023 budget, which is close to 90%.

As per recent estimates, Pakistan is expected to spend more than 90% of its revenue target in debt servicing, leaving very little to no cushion for defense, let alone other expenses. In the past Pakistan has financed the deficits of its budget through borrowing from international and domestic sources. However, it is this very unsustainable nature of budgeting that has led Pakistan to where it is today.

With virtually no opposition in the legislative assembly, the federal government is most likely to pass their version of the budget this time around. A budget that gets implemented without opposition is not entirely representative of the people’s wishes. Specifically a budget as critical as that of 2023. One thing is however, clear as day. In terms of development, quality of life and economic stability, 2023-24 is possibly going to be one of the worst years for the common man.

Ambassador Durrani, a career diplomat, served as deputy chief of Pakistan’s mission in Kabul from 2005 to 2009. He also served as Pakistan’s ambassador to Iran and United Arab Emirates (UAE). Currently, Mr Durrani was serving as Senior Research Fellow in Islamabad Policy Research Institute (IPRI). Mr Durrani comes from a family of seasoned diplomats and bureaucrats from Quetta, Balochistan, and has mastered the skill of resolving issues amicably. However, Mr Durrani has a challenging job at hand as relations between Pakistan and Afghanistan are complex now-a-days and recent incidents and attacks from Tehreek-i-Taliban Pakistan and its splinter groups have added to the misunderstandings between the two neighbours.

Moreover, Mr Durrani’s appointment also comes amid discussions being made to expand the multibillion-dollar project of China-Pakistan Economic Corridor (CPEC) into Afghanistan which can connect the landlocked Central Asia to the rest of the world through Afghanistan and Pakistan.

Afghanistan, which is going to become a pivot country in the trade and connectivity through the Belt and Road Initiative (BRI) launched by China, can benefit hugely if peace and stability can return to the conflicthit nation which is facing war since past 40 years. Though both countries have an opportunity to start afresh following the recent trilateral dialogue as Chinese Foreign Minister Mr Qin Gang and Afghan’s Acting Foreign Minister Mr Amir Khan Muttaqi visited Pakistan. The meeting ended on a positive note and a joint communique was issued which reflected development on major issues including trade and joint action against terrorism.