Who controls the budget?

Dr Pervez Tahir

The Parliament set something of a record by passing the federal budget within 12 days of its presentation. It was placed before it later than usual when the Parliament exists and got through earlier than the Government had expected. Was the Budget so great that it attracted no serious opposition, or it resulted from the familiar lack of interest by the Parliamentarians?

Ostensibly a new political consensus prevails that all decisions must be taken in the Parliament. The budget involves a set of decisions: decisions to tax, decisions to borrow and decisions to spend. All of these are decisions related to the welfare of those that the Parliament represents. “All Power to the People” adorns the manifesto of the ruling party; it was a constant refrain in the elections campaign. The Parliament represents the power of the people. But who controls the budget, the Executive or the Parliament? The answer to this question determines the extent of interest of the parliamentarians, and not the uncharitable stories about their competence in a “technical” matter like the budget. Where there is interest, there will be competence. (Technical competence on the side of the Executive is not that great either!) Just as a community has no interest in maintaining a water-supply scheme in the planning and execution of which it had no role, the parliamentarians have little interest in a budget which is presented to them as a fait accompli by the Executive after spending well over eight-nine months on its preparation. Political programmes to provide constituency funds, billed as a vehicle to attract parliamentarians towards the budgetary deliberations, have had the opposite effect of keeping them quiet. Every law passed by the Parliament first goes through its committee system, but not the budget.

The Executive arms involved in the process of budget-making, in order of importance, are the Finance Division, the Revenue Division (the Federal Board of Revenue), the Planning and Development Division (the Planning Commission, the ministry of planning and development are in effect the same thing) and the Economic Affairs Division. The ministry of finance, comprising the Finance, Revenue, Economic Affairs and Statistics Divisions, is obviously the lead player. The Finance Division deals with current expenditure, domestic borrowing and foreign private borrowing. It produces eight documents: the Budget Speech, the Annual Budget Statement, the Demands for Grants in two parts for current and development expenditure, the Budget in Brief, Estimates of Federal Receipts, the so-called Pink Book of detailed item-wise expenditures and the Economic Survey.

Levy and collection of federal taxes fall in the purview of the Revenue Division. It does not formally call for proposals, but government bodies and private sector voluntarily send proposals. Taxation proposals are formulated in camera. The FBR drafts the Finance Bill. The Planning and Development Division is charged with the responsibility of preparing the development budget and the plans for the next year, medium-term and visions for the long term. It produces two documents – the Public Sector Development Programme and the Annual Plan – every year, a medium-term planning document occasionally and a vision document when need be. The Economic Affairs Division assesses the requirements of external economic assistance from foreign governments and multilateral agencies and manages the external public debt. It prepares the budget document called Estimates of Foreign Assistance.

The Finance Division is in the driver’s seat. Though Revenue, Economic Affairs and Planning and Development are separate Divisions, they all have to follow the Budget Call Circular issued by the Finance Division to forward Revised Estimates for the outgoing year and budget estimates for next year, respectively, for tax receipts, foreign assistance and the Public Sector Development Programme. All other divisions have also to respond to the Budget Call Circular by stipulated dates on the Revised Estimates for the outgoing year and the Budget Estimates for the next year for development as well as current expenditure in the prescribed manner. Following the Budget Call Circular of Finance Division, Planning and Development Division issues its own PSDP Call Circular, giving a time schedule, with the advice that the estimates should not include any scheme not approved by DDWP/CDWP/ECNEC.

The budgetary process usually begins in early October when the Budget Call Circular is issued by the Finance Division. Current budget guidelines for financial advisers representing the Finance Division in other Divisions are provided by mid-November, proposals for the current budget by divisions to the Financial Adviser Organisation are submitted by mid-December and general recommendations of the financial advisers for current and development expenditure are ready by mid-January. The Finance and Planning Divisions jointly carry out a mid-year review of the ongoing development budget and following year’s estimates by the third week of January. The last date for submission of current expenditure estimates to the Budget Wing of the Finance Division fall in the first week of March, the finalisation of development budget/PSDP in the Priorities Committee co-chaired by the Finance and Planning Divisions takes place in the first two weeks of April. All Divisions send fair copies of the development budget countersigned by the technical/programming sections of the Planning and Development Divisions to the Budget Wing of the Finance Division towards the end of April.

Up to this point, the process is completely in the hands of the bureaucratic segment of the Executive branch. Each ministry is headed by an elected minister or unelected adviser and there is political involvement to the extent that they are kept on board by the bureaucracy. Usually the political level takes interest in the funding of some pet projects. Leading the ministry’s budget-making with a view to achieving the objectives of a policy is an exception, not the rule. The first occasion for collective political guidance is the Annual Plan Coordination Committee (APCC) meeting in early May, chaired by the deputy chairman of the Planning Commission and attended by the provincial planning ministers. The next political forum is the National Economic Council (NEC) meeting in end-May, chaired by the prime minister and participated by ministers and chief ministers. The APCC and the NEC finalise the annual plan and the PSDP. The bureaucratic-political process culminates in the special cabinet meeting in early June. This covers all of the three important components of the budget-development budget, current expenditure and revenues.

This is where the Parliament comes in. It had no role in the preparation and the formulation of the budget. It must digest and deliberate in two-three weeks on what took the Executive some eight months to prepare and put together in 12-plus not easy to comprehend documents. Its role starts after the cabinet has cleared the budget and authorised its tabling before the Parliament, normally in the first week of June. As new fiscal year starts from July 1, the budget must be passed by the June 30.

In sum, the executive in Pakistan nearly completely controls the budget. One has to go no further to look for the source of the perennial disconnect between the aspirations of the people and the allocation of national resources.
Courtesy The News