Buried in red tape: Govt runs budget overruns without parliament’s approval

Fiscal deficit for outgoing year to close at 6.2% of GDP, not 5.7%, as declared by the finance ministry.

ISLAMABAD:

The government has spent Rs386.7 billion over the budgeted limit approved by Parliament, with the country’s economic managers misleading the legislature by burying the government’s real expenditure inside official documents and citing different figures in the finance minister’s budget speech.

The government’s true fiscal deficit for the financial year ending June 30, 2011 comes to Rs1,122 billion, or 6.2% of the size of the economy, as opposed to Rs1,031 billion, or 5.7% of gross domestic product (GDP), as claimed by Finance Minister Abdul Hafeez Shaikh in his speech to the National Assembly on June 3.

The figures from the “Supplementary demands for grants” book, a thick volume issued by the finance ministry to every member of Parliament but that includes details of the money spent beyond parliamentary approval.

At the time the budget was announced, the government had set a budget deficit target equal to 4% of GDP. By adding the Rs387 billion in supplementary grants, however, the deficit will now be 6.2% of GDP.

The supplementary grants have already been spent without parliamentary approval and have now been presented in a voluminous 235-page report for post-hoc approval.

A major chunk of the supplementary grants – about Rs336 billion or 87% of the total - was spent on power subsidies. The government has announced its intention of removing this burden on the national exchequer by deregulating energy prices from this year, though such promises have also been made in the past without much in terms of results.

Much of the remaining grants, about Rs44 billion, were spent on expenditure overruns by the military on account of the war against terrorism and other security-related spending. The supplementary grants to the military contradict the finance minister’s earlier claims that the defence budget had not been increased despite insistence from the military leadership.

In addition to the cost overruns represented by the supplementary grants, the government also redirected Rs307.2 billion within the allocations of the budget by cutting development spending, though sparing money for projects favoured by influential members of Parliament, including the prime minister.

Defence Overruns

The armed forces were given Rs2.5 billion in supplementary grants on top of stated defence budget of Rs442 billion. In addition to that, Rs41.7 billion indirectly granted to the military. About Rs24 billion was granted as to pay for additional costs in the war on terror, Rs10 billion for an unspecified “strategic purpose” and Rs7.7 billion for expenses related to United Nations’ peacekeeping missions.

Taking the supplementary grants into account takes military expenses outside of the stated defence budget to Rs141 billion. The total military budget for the outgoing year then comes to Rs585 billion, instead of the stated Rs444 billion.

Within the budget adjustments

The government took out Rs33 billion from the development programme and allocated an amount of Rs12 billion for Earthquake Reconstruction and Rehabilitation Authority. It also diverted Rs21 billion to programmes carried out under Peoples Works Programmes I and II – the umbrella term for programmes created at the direction of parliamentarians.





Published in The Express Tribune, June 9th, 2011.