Islamabad; June 4, 2012, While it is the Government's job to prepare the budget, it is the Parliament's most important responsibility to scrutinise, pass and oversee the spending of the budget. Without creating a balance in these constitutional roles, public representatives will remain outside the loop of crucial policy making on budget. These views were expressed by various speakers and analysts at the Briefing Session organised by PILDAT today on Understanding Budget 2012-2013 ahead of the budget debate beginning in the two Houses of Parliament today.
It was also demanded by PILDAT that the amendment approved by the National Assembly Standing Committee on Rules and submitted to the House on March 1, 2012 must be passed by the House urgently to allow committees to effectively scrutinise departmental budget in detail. The proposed amendment demands that "each Ministry shall submit its annual budgetary proposals for the next fiscal year to the concerned Standing Committee not later than the 30th January; and the Standing Committee concerned shall scrutinize the proposals and recommend to the National Assembly amendments therein, not later than the 20th February, if necessary, provided that if the recommendations are not made by any concerned Standing Committee by the 20th February, such budgetary proposals may be forwarded to the National Assembly for consideration; and the National Assembly shall finalize the recommendations in a pre-budget session not later than the 5th March and such recommendations may be incorporated by the concerned Ministry in its budgetary proposals for next fiscal year."
PILDAT noted with satisfaction the Government's statement in the "Budget in Brief" in which it is said that: "These analytical pieces (Medium-Term Macroeconomic Framework and Medium-Term Fiscal Framework) presented to the Cabinet through a paper called 'Budget Strategy Paper'. The paper is also shared with Parliamentary Standing Committees on Finance and Revenue and political parties." It is a welcome beginning that must extend to increasing the duration of the budget session and allowing Standing Committees to scrutinise their respective ministries budget before the passage of the budget, PILDAT demanded. Federal Ministers of Finance and leaders of the Peoples party have pledged to introduce this reform on the floor of the House.
Mir Aamir Ali Magsi, MNA (NA 206, Larkana III, Sindh, PPPP) chaired the Session while the key speakers included Mr. Nohman Ishtiaq, Financial Expert, Air Vice Marshal (Retd.) Shahzad Chaudhry, Defence analyst, Ms. Anjum Ibrahim, Resident Editor, Business Recorder and Ms. Aasiya Riaz, Joint Director, PILDAT addressed the participants at the session. A PILDAT Brief for Parliamentarians titled Contours of Budget 2012-2013 was especially prepared and disseminated ahead of the start of the budget debate in Parliament.
Mir Amir Ali Magsi, MNA (NA-206, Larkana-III, Sindh, PPPP), member National Assembly Standing Committee on Defence who chaired the briefing praised what he termed as an important initiative by PILDAT. He shared that while the National Assembly Standing Committee on Defence was briefed earlier this year on the defence budget, most details of the budget were not presented. He believed that while it is important for elected representatives to consider re-defining the national security paradigm, perhaps the Armed Forces can also contribute to this aspect.
Delivering his key-note presentation, Mr. Nohman Ishtiaq discussed in detail the parameters of the Federal Budget. Presenting a detailed overview of the Federal Budget 2012-2013, he said that it is important to keep in view the economic, political, and defence-related context of the country in mind. 163 demands for grants have been presented in 2012-2013. Discussing the overall framework, he said that Pakistan's economic condition is fragile with 7.4% of our income or more than 1 trillion rupees as deficit.
Highlighting the second important point he said that another way to understand the budget is to look at the figures of Income, Expenditure, Deficit and Loans. 32% of the Federal Budget is for debt-servicing, 19% for defence, 13% in grants to the provinces (in addition to NFC), 12% for development, 9% as Federation's recurring expenditure, 8% in subsidies, 5% in pensions and 2% in subventions.
He also highlighted that Pakistan's interest expenditure, at nearly 45% as a percentage of tax revenue is highest in the world which is alarming. He highlighted that whereas it is the Executive's job to make the budget, it is the Parliament's job to scrutinise it. Over time, the balance has tilted towards the Executive and the Parliament needs to assert its role and exercise its constitutional role of budget scrutiny before passage and oversight of expenditure more effectively.
Addressing another important issue, Nohman said that Article 84 of the Constitution gives the power to the Executive to spend supplementary funds and seek post-dated approval from the Parliament. This is bad financial management and the Parliament must legislate to amend this. He highlighted the case of 2008, the election year, as an example in which even though Parliament had approved -4.0% budget, the government spent -7.6% instead - a deviation of 90%. In 2012, this deviation is projected to be 84% - a trend the Parliament must oversee carefully.
He also highlighted for the benefit of Parliament and Standing Committees that in order to effectively oversee the budgets of ministries and divisions, Committees must study whether Economy, Efficiency and Effectiveness objectives have been fulfilled. The Medium Term Budgetary Framework document presented to the Parliament makes ministries present their budgets by goals and outputs. Nohman also presented examples of Defence budget as well as the budget of Ministry of Information and how Committees and MPs can oversee these and other budgets.
Addressing the lack of a national law on Public Finance, Nohman said that last legislation on this, that governs the public finance system in Pakistan, was at the time of Viceroy of India Chelmsford and Secretary of State Montagu in 1920. Nearly a 100 years later, Pakistan's Parliament has been unable to pass a law on public finance that suits our own needs.
Speaking on the occasion, Ms. Anjum Ibrahim, Editor Business Recorder, said that while in UK the coalition government consulted its coalition partners while making the budget, Pakistan's government did not consult its coalition partners including the ANP, MQM and the PML. MQM even outlined its own shadow budget which speaks volumes about the lack of consultation with thin the government with coalition partners. She also highlighted data integrity as an issue evident both in the Economic Survey of Pakistan as well as in the budget documents. It is essential, she proposed, to de-link Bureau of Statistics from the Ministry of Finance. As political governments both in the centre and in Punjab have tried to out-do each other in raising the minimum wage to 9000 that both have been unable to implement. She also criticised the Finance Minister for pushing up the wages of bureaucracy to a level where the private sector has not been able to keep pace with it, adding that an increase in salary should have been adjusted keeping in view the rate of inflation only.
Speaking on the topic of Demystifying Defence Budget, Air Vice Marshall (Retd.) Shahzad Chaudhry said that contrary to the popular perception, the Armed Forces follow a strict procedure, much like any other Ministry, through which defence budget is prepared. Each service has to prepare the budget under 3 heads: obligatory budget, which includes pay & perks, Operations and Maintenance and the Development Budget, the most-talked about aspect but the one which is only determined by fiscal space of the Government of Pakistan. For instance, he said, Pakistan purchased F-16 jets in 1983 and again in 2011. He said that instead of focussing on polemics on reducing the defence budget, Parliament and political parties must work to change the mission of the Armed Forces or change the threat level to the country or consider reducing the size of forces.
Focusing on military's commercial interests and DHAs, he said that Parliament as well as media must investigate details of how Housing Schemes are made and they will know reality. In terms of commercial enterprises, questions must also be asked whether these have been created for the purpose of providing employment to able-bodied retirees at 45 years of age or any other purpose. Essentially, he reiterated, after a factual investigation, the decision to retain DHAs or commercial enterprises must be made by the society at large.
Members of Parliament present on the occasion deeply appreciated PILDAT's initiative and raised various questions relating to the budget. Senator Rafiq Rajwana (Punjab, PML-N) stressed on the need to have budget based on facts while Mr. Naseer Bhutta, MNA (NA-127, Lahore-X, Punjab, PML-N) highlighted how much he benefitted from the timely and detailed briefing. Senator Usman Saifullah (KP, PPPP) said that we need to increase tax revenue to the amount we spend on defence. However, in order to do that, we need a political consensus on that in Pakistan that all political parties must strive to facilitate. Mr. S. A. Iqbal Qadri, MNA (NA-241, Karachi-III, Sindh, MQM) also stressed on the need to increase the tax revenue by enlarging the tax-base to include agriculture sector. Senator Haseeb Khan (Sindh, MQM) lamented the lack of exercise of Parliamentary powers in budget scrutiny. He said that economy is almost on the verge of collapse and we have to widen the Tax net in order to survive. Senator Mohsin Leghari (Punjab, Independent) stressed that provinces must take charge of subjects such as agricultural tax and it is only when legislatures empower themselves can we hope for a better legislative control and scrutiny of the budget.
Discussing the percentage of defence budget in the overall budget, Lt. Gen. (Retd.) Talat Masood said that in addition to the creation of balance in civil-military relations in Pakistan, effective and pro-active institutions on decision-making on national security are needed. Only when we achieve the balance, can the civilian elected leaders have the confidence to re-orient Pakistan's threat perception. He disagreed that Pakistan faces the biggest security threat from India and instead believed that our biggest security challenge is internal which can not be resolved through military means alone. Education and jobs are needed in the militancy-ridden areas. Militaristic intervention has to be very brief and targeted in such areas. It is regrettable that in Pakistan, negative forces are reinforcing ourselves while the organised state and society are inactive. Defence budget should keep these priorities in mind.
Welcoming the members of Parliament, analysts and media to the briefing, Ms. Aasiya Riaz, Joint Director PILDAT, said that one of the most crucial of all powers of Parliament is the control over funds. However, for its most important responsibility, Pakistan's National Assembly seems to be spending the least amount of time. A 10-year analysis of Budget sessions in the National Assembly reveals that at an average only 12 days are spent on Budget every year while average number of hours spent each year on budget are merely 34. PILDAT believes that Parliament must focus more on budget and increase its duration of budget scrutiny. Similarly, without detailed scrutiny of ministry or division-wise budget by each Standing Committee, the exercise of budget scrutiny is merely an exercise in name. She welcomed the initiative by Parliament, especially National Assembly's Standing Committee on Rules and Procedure that has passed an amendment in rules to provide role to committees in the budget scrutiny and hoped that the House will pass this amendment soon.
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