Budget-Making in Pakistan

Budget-Making in Pakistan

Say Yes to Transparency

Zafrullah Saroya

In modern governance, the budget of a state is one of the most powerful fiscal instruments at the disposal of an incumbent government to implement its political commitments and development agenda. Tabled every year in the parliament, the budget contains the ideas that are to be translated into implementable policies prioritized by the allocations of funds. It reflects a country’s social, economic, fiscal and financial responsibilities and also tells about government’s policies for the future. In Pakistan, the budget is known as the Federal Budget. Since financial year in the country starts from 1^st July, the budget is presented before the National Assembly usually in the first week of June every year; however, the government can present it even before that.

In Pakistan, the Annual Financial Statement (generally known as budget) is presented according to the governing laws enshrined in various articles of the Constitution of Pakistan, 1973. Although a bill can be originated either in the National Assembly or in the Senate, the Money Bill can only be tabled in National Assembly, the lower house of the parliament. This document is presented by the finance minister and after passage of the finance bill in the parliament, approved by the President within 30 days of its passage to become a law. However, the document takes months of hard work for its preparation before it is presented before the National Assembly. Here is a brief description of the process:

The budget-making process starts in October each year on issuance of a Budget Call Circular (BCC) by Ministry of Finance. BCC is issued to all the ministries, divisions and departments of the government. It explains the procedure for preparation of Budget estimates. A detailed timeline is also given for completion of various stages of the Budget. The original estimates are framed minutely by the agencies and departments, and are submitted to the respective ministries and divisions who, in turn, examine and pass these on to the concerned Financial Advisers with their recommendations.

From November to February, these ministries and divisions submit their budget proposals to the concerned quarters. In March and April, these proposals are thoroughly scrutinised by the Finance Ministry. After the scrutiny, the formulation of budget proposal is being done. Consideration and approval of these budget proposals are done during the months of May and June which after the finalisation become the part of Annual Budget Plan. The budget after approval of Cabinet is presented in the National Assembly. Once passed by the National Assembly, the Budget is sent to the President for approval. The President must give his approval within 30 days. Once it receives presidential approval, it becomes a law. If the government is failed to get the approval of budget from National Assembly it get dissolved automatically.

Since 2003, it had been made essential that the budget statement is copied to the Senate at the same time as its presentation to the National Assembly. The Senate which is upper house of the Parliament can discuss the budget proposals and make recommendations to the National Assembly. These recommendations are not binding upon the federal government to be accepted.

Budget Cycle

The government’s budget cycle usually consists of six stages broadly categorized as follows:

1. Setting of policy and priorities

The first stage of budget cycle usually covers setting of budget priorities, policies and initiatives by the National/Provincial Cabinet. These are then formulated by ministries and departments via the Ministry of Finance/Finance Department.

2. Budget Preparation

This stage includes the preparation and submission of budget estimates of expenditure and receipts by spending departments and subsequent review and consolidation of estimates by the Ministry of Finance/Finance Department.

3. Authorization

This stage involves submission of the Annual Budget Statement before the National/Provincial Assembly. This consists of two stages: approval by the National/Provincial Assembly after it is debated/discussed in the Assemblies, and authentication by the Prime Minister/Chief Minister. The approved budget is referred to as the ‘Schedule of Authorized Expenditure’ (SAE), which is then submitted to the President/Governor for assent.

4. Execution

This stage refers to the communication of the budgets to the spending ministries, administrative departments and respective Accountant General office/Accountant General of Pakistan Revenue by Ministry of Finance/Finance Department. Budget execution supports the spending departments to carry out their planned activities and incur expenditure within the authorized limits.

5. Reporting and Monitoring

In this stage, actual expenditure/revenue are recorded and reported by the spending departments to facilitate monitoring of progress against budget allocations throughout the fiscal year. Expenditure is recorded by Accountants General/Accountant General Pakistan Revenue.

6. Periodic Review

This covers periodical review of financial performance and the achievement of policy objectives by spending departments. This also includes audit reviews by Auditor General’s office and review by Public Accounts Committee. Standing Committees of the Parliament and provincial assembly are also authorized to review expenditures of the ministries under their jurisdiction.

Parliamentary rules

According to the Rules of Procedure of the National Assembly, the Speaker allots days for the different stages of the Budget. It requires two days to lapse between the days the Budget is presented and the first day of the General Discussion.

The debate duration

The Rules prescribe that not less than four days should be allotted for the General Discussion. Any member can move a cut-motion to reduce the amount of demand. Each Demand for Grant is discussed and voted upon. Consequently, a Vote of Account is taken and the Finance Bill is passed. The Budget is submitted to the Senate for recommendations. The Senate can make recommendations on the Budget to the National Assembly within seven days. These recommendations are not binding on the National Assembly. From its presentation before the National Assembly to its approval, the budget process generally takes 12 to 17 working days for various stages in debates.

Related Articles of the Constitution

Articles of the constitution of Pakistan relating to the budget are:

Article 73: procedures with respect to money bills “when a Money Bill, including the Finance Bill containing the Annual Budget Statement, is presented in the National Assembly, a copy thereof shall be transmitted to the Senate which may, within fourteen days, make recommendations thereon to the National Assembly; and] 35[(1A) The National Assembly shall consider the recommendations of the Senate and after the Bill has been passed by the National Assembly with or without incorporating the recommendations of the Senate, it shall be presented to the President for assent.”

Article 73: Procedures with Respect to Money Bills— “a Money Bill shall originate in the National Assembly … [(1A) The National Assembly shall, consider the recommendations of the Senate and after the Bill has been passed by the Assembly with or without incorporating the recommendations of the Senate, it shall he presented to the President for assent.]

Article 77: Tax to be levied by law only—“No tax shall be levied for the purposes of the Federation except by or under the authority of Act of Majlis-e-Shoora (Parliament).”

Article 80: Annual Budget Statement—“The federal government shall, in respect of every financial year, cause to be laid before the National Assembly a statement of the estimated receipts and expenditure of the Federal Government for that year, in this Part referred to as the Annual Budget Statement.”

Article 81: It enunciates the expenditure charged upon Federal Consolidated Fund

Article 82: It is related to expenditure charged upon the Federal Consolidated Fund may be discussed in, but shall not be submitted to the vote of, the National Assembly.

Article 83: It is about Authentication of schedule of authorised expenditure by the Prime Minister

Article 84: It is about the Supplementary and Excess and the procedure of it to be laid down before National Assembly for approval.

Areas which need reform

In Pakistan and elsewhere, there are at least three obstacles in improving the transparency of budget processes: weak citizens’ involvement, limited parliamentary debates and unavailable or opaque information on budgets.

1. Engagement of parliamentarians in the budget-making process is limited. Only 15 to 20 days are allocated on average for parliamentary debate. Budget sessions are extremely short, leaving insufficient time for substantive discussions. For example, in the FY2003-04, the federal budget was passed in just nine hours. The longest duration period was 56 hours in 2006. India assigns 75 days for parliamentary discussions; Pakistan should also increase the days allocated for parliamentary debate. The Statutory Regulatory Orders (SRO) regime further curtails the oversight of parliamentarians in budgetary affairs and inflicts losses to the exchequer: the cost of exemption and concessions through SROs has been around Rs470 billion in 2014 alone.
2. The concept of participatory budgeting for increased citizens’ involvement is nonexistent in Pakistan. There is no provision and tradition of parliament led pre-budget consultation with parliamentarians, civil society and citizens at large. Citizens’ participation is because it addresses inequalities and enhances the performance of policies and allocations. For instance, in Porto Alegre, Brazil, citizen participation empowered low-income segments of the population to raise their voices and prioritise their needs. The sewer and water connections in Porto Alegre increased from 75 per cent of the total households in 1988 to 98 per cent in 1997. The number of schools quadrupled, and health and education budgets increased from 13 per cent to 40 per cent in 10 years. Pakistan should also move towards this system.
3. Individual parliamentarians and the Parliament as an institution, lack the infrastructure to give research and analysis support for an effective Budget debate in the Parliament.
4. The Budget relating to Defense services lacks details. Even the distribution among the three services such as Army, Air Force and Navy is not provided.
5. The Standing Committees both of National Assembly and Senate, which are mostly formed in line with the Ministries and Divisions, have not been assigned any role in the Budget process. Even the Standing Committees on Finance does not play any role in the Budget process.
6. Budget-making process continues to be obscure amid the creative budgeting practices such as block allocations. ‘Block allocation’ of funds for unapproved projects defeats the principles of transparency and generally represents 20 per cent of the total estimated development expenditures. So, secretive measures like block allocations should be reduced to make the budget-making process more transparent.

Conclusion

The answer to practical democracy is active involvement of people at every step of governance including the budget-making process. However, the process has been largely ambiguous due to which people no opportunity to participate in the process that directly affects the quality of their lives. In conclusion, success in achieving economic policy goals and budgetary outcomes depends on the institutional framework supporting overall public financial management in the country. A country’s budget-making process should be transparent, participatory, accountable and responsive to the needs of citizens and state. There is a need for wide-ranging institutional reforms to achieve these ends.

Key Abbreviations