Categorized | South Asian Politics

Problems of Implementation of the Pakistan Budget

Posted on 27 June 2013 by admin

Dr. Hasan Askari  


 Pakistan’s new federal and provincial budgets will become effective on July 1 when the new financial year begins. There have been some changes in the federal budget in the course of the debate on it in the National Assembly. All federal employees have been given a ten percent raise in their salary and the minimum wages has been raised from Rs. 8,000 to Rs. 10,000 per month. Few other adjustments have also been made. The Supreme Court’s judgment to declare the collection of enhanced sales and other taxes before their approval by the National Assembly under an old law as illegal has caused administrative problem for the federal government. This judgment also shows that the Supreme Court under the present Chief Justice will continue with its policy of intervening in the domain of the federal executive. In the past when the Supreme Court used to do this with the PPP federal government the PMLN was very supportive the Supreme Court. Now, the PMLN will face the Supreme Court’s active intervention in its affairs because some matters are pending before it.

  One can make the argument that the budget has mostly ignored the promises the PMLN made during the election campaign. The major PMLN argument was that the economy was in trouble and there was no economic relief to the common people because the PPP federal government was corrupt, incompetent and inefficient. If the people knock out this government the PMLN will turn around their fortune. The PMLN leadership vowed to work for ending load shedding completely in three years, provide economic relief to the common people and fix the minimum wages at Rs. 15,000 per month.

  However, if we examine the budget keeping in view Pakistan’s troubled economy, it seems appropriate to suggest tough economic measures, especially enhancement of taxes and the planned reduction in the administrative expenditure of the federal government. The current trends of printing new currency notes and offering financial subsidies on utilities and irresponsible expenditure by the high up in political and administrative positions cannot be allowed to go unchecked.

 Given the troubled state of the economy a budget of economic concession could not be given. However, the PMLN should acknowledge its promises during and before the election campaign were unrealistic. Now, after assuming power it faces an uphill task to convince the voters that it cannot quickly deliver its promises.

  The major challenge that the government faces relates to its effective implementation. The political governments are vulnerable to public pressure, especially street pressure. The PMLN government derives its main strength from the business and trading communities in the Punjab. It is always difficult to get taxes from them who have a long experience of finding ways to bypass stringent laws or they engage in street protest by disrupting traffic on the major streets in Lahore and other cities in the Punjab and closing their business activity. Even government servants of the lower strata launch their own protest. They did that within a day of announcement of this budget. The federal government tried to appease them by giving 10 percent raise in the salary within two days of their protest.

 The federal government will have to implement the promised cutback on expenses of state machinery without compromising on performance. Can the Prime Minister House and other key officials make their expenditure cost-effective? Can the people in high offices give up their “royalty style”? How would the government reduce the liabilities of state enterprises and appoint professionals to top management slots without giving them “hefty” salaries and facilities?

 The key question is the capacity of the Federal Board of Revenue to collect taxes especially from those who are not in the tax net. This requires an efficient tax management and collection system which is transparent and the Income tax officials should not be allowed to harass the tax payers in the name of collecting more taxes. Tax collection should be increased through consultative process with the business and trading communities; talk to them for respectable ways to pay the tax to the state rather than giving corruption money to officials.

 There is a heavy reliance on foreign assistance and domestic borrowing. External receipts have been shown as Rs. 169 billion and Rs. 975 billion are to be obtained from domestic bank borrowing. The main sources of external funding are Coalition Support Fund and the Kerry-Lugar-Berman Law Funding. Not much may be available under Coalition Support Fund and the United States has become somewhat stringent on allocations to different project from KLB Law funding. Bank borrowing may give immediate relief to the government but it adds to the overall debt burden and reduces the funds available for private sector borrowing.

 On the one hand the federal government wants to reduce budget deficit from over 8 percent to little over 6 percent. On the other hand it has made huge allocation for development programs (Rs. 1.15 trillion: federal share Rs. 540 billion, provincial share Rs. 615 billion) including publicity oriented programs like distribution of laptop to students, youth training and skill program, micro finance and small business loans, tuition fee project housing finance scheme and higher education commission funding. All these are praise worthy commitments in their individual capacity. However, given the policy of tightening on expenditure, reduction of budget deficit and the dubious capacity of the state to collect the projected revenue the state may not have enough resources to pull through development programs.

  The federal government will have to stay alert so that the bureaucracy implements the budget in its true spirit. The capacity of the state institutions will have to be strengthened to fulfill the required task otherwise the government would not have enough financial resources to pull through the development and other programs in the budget.

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