Call for budget reforms

Pakistan passes budget in haste as debate continues for only 10-15 days

ISLAMABAD:

With the annual budget season setting in, Pakistan is ready to present its fourth budget under the Public Finance Management Act (PFMA) 2019; though the whole exercise is just a ritual as the executive enjoys unlimited powers to pass supplementary budgets throughout the financial year.

The Executive Committee of the National Economic Council (Ecnec) in April 2023 approved a major cost escalation exceeding Rs300 billion for the Diamer-Basha power project as well as additional budget for megaprojects of the Water and Power Development Authority (Wapda) and the National Highway Authority (NHA).

Similarly, in January 2023, Ecnec approved around a dozen projects worth Rs470 billion. This means that the budget for 2022-23 was repeatedly revised to become more bloated even in its last quarter.

So, the burning question is: why supplementary budgets matter for the body politic?

As the pre-partition General Financial Rules (GFR) are still very much applicable, so as per Rule 104 of the GFR, prior assent of the National Assembly is required before any supplementary funds are made available, but in practice, ex-post facto approval is the way to go.

These ex-post facto approvals of supplementary bills issued all year round are a sign of systemic financial indiscipline.

Article 84 of the Constitution that allows supplementary budgets and grants is meant to be invoked in case of unforeseen expenditures only, such as in the case of emergencies. But when it becomes a norm and no longer an exception, it implies that our planners need a masterclass in public finance.

Cost escalations and variation for megaprojects exceeding 15% indicate that either the projects are being executed in a volatile environment, or that adequate financial projections for project finance weren’t done. Both are somehow true in our case.

Though the preparation of budget draft is the responsibility of the executive, it is a good practice to conduct a wider consultative process with other stakeholders such as parliamentarians, experts, and members of civil society at large.

Pre-budget consultations are quite common in developed economies that promote a culture of healthy debate; something which is badly needed in Pakistan.

Similarly, unlike other Commonwealth nations such as India, Canada and the UK, Pakistan passes its budget in haste and on average, the budget debate continues for 10 to 15 days or hardly 40 hours.

In contrast, the UK has a 90-day budget process while India spends 75 days on debate and non-partisan analysis.

Our parliamentarians are provided with a lengthy document of 2,000 pages that they must go through in a day or two. Budget chapters are not referred to the committees concerned for review and endorsement.

There is no Parliamentary Budget Office that looks at the budget with an independent perspective and provides technical support to the MPs. Because of all these factors, parliamentary oversight over budget becomes limited.

Rule 201 of the National Assembly Rules of Procedure empowers standing committees to get briefings from the ministries concerned for the next budget/ PSDP, and the ministries should later submit a status report regarding implementation of the recommendations made by the committees.

However, hardly any ministry reports its mid-year expenditures or gets assessment of its budget demands from the committees. This rule, if followed in true spirit, could pave the way for some oversight of the budget process.

In a nutshell, it is a call of time to start the budget exercise by first reflecting on last year’s planned budget figures and the actual numbers reported. Learning lessons will help develop insights into what went wrong and how to avoid that happening in future.

Unless we do that, Pakistan might be the only democracy in the world where budgets can be tweaked at any time using supplementary grants, and where annual budgets remain a subject less understood and left best to the bureaucracy.

The writer is a Cambridge graduate and is working as a strategy consultant

 

Published in The Express Tribune, May 29^th, 2023.

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