Budget: a ritual and political gimmick

It is followed by series of supplementary budgets due to loophole in constitution

ISLAMABAD:

Imagine a country where the federal budget is a ritual that is ceremonial at best, and parliamentary oversight is a race for funds to execute political development schemes and pet projects.

Imagine a democracy where budgets are opaque and mired by allegations of irregularities and misallocation of funds. You guessed Venezuela or Nigeria, right?

But no, we are talking about Pakistan where annual budget is usually a political gimmick, followed by a series of many supplementary budgets that go largely unnoticed by the media and civil society.

Surprisingly, the 2023 Fiscal Transparency Report, issued by the US State Department, regarding Pakistan was overall satisfactory and had only a few reservations such as debt obligations of state-owned enterprises were not disclosed in budget documents.

But according to the Open Budget Survey (OBS), conducted by the International Budget Partnership, Pakistan’s budget transparency scores have almost halved from 58 in 2012 to 30 last year – well below that of India, Nepal, Sri Lanka and Bangladesh.

Similarly, our legislative oversight score is a mere 28/100, making the whole budget exercise self-defeating. Public participation scores in the budget process also leave a lot to be desired as public engagement remains minimal, with little or no opportunity for any citizen input.

However, even poor open budget scores and stumbling rankings are not that of a problem as is the longstanding loophole in our constitution: Article 84 (supplementary and excess grants). This article gives the federal government the power to authorise any change or increase in the budget without prior approval of parliament.

These supplementary budget statements are then usually brought to the attention of the National Assembly only when next year’s budget bill is about to be presented. At that time, parliament has no option but to give its ceremonial approval as the expenditure has already been incurred.

This flaw in the budget process has given the executive branch significant influence over the budget, with minimal parliamentary input, making it overall a rubber-stamp exercise. In no developed country, the executive has such powers to alter budget on its own by usurping the powers of parliamentarians to authorise finance bills.

This problem is as serious as it gets. Last month, the ECC on behalf of the federal government approved a supplementary budget worth Rs147 billion and gave its nod to bank loans of Rs41 billion.

In March, the Punjab Assembly gave a ceremonial approval to the supplementary budget of a whopping Rs617 billion just a few days after passing the annual budget, citing that the caretaker government had already spent a budget of Rs3.8 trillion out of the total Rs5 trillion.

Similarly, less than a week before presenting the annual budget for 2024-25, the Khyber-Pakhtunkhwa Assembly rubber-stamped Rs306.5 billion in supplementary grants, inflating the annual budget of 2023-24 by 36%.

Closing such a loophole to improve fiscal discipline and parliamentary oversight requires a constitutional amendment. Though we recently had the Public Finance Management Act (PFMA) 2019, yet it didn’t touch this matter and mostly legitimised the already existing bureaucratic practices.

Limit PSDP to federal areas only

One such practice and more of a problem in the federal budget is the Public Sector Development Programme (PSDP) – a form of Soviet-style central planning that is now obsolete. In Pakistan, a large PSDP has traditionally been used to boost GDP growth numbers through public spending, although most part of the PSDP is always hijacked by interest groups and spent on the “development” schemes of MNAs.

After the 18th Amendment, there is a dire need to limit the PSDP budget to Islamabad and federally controlled areas only as Pakistan’s development challenges are local, and not necessarily national, and it should be up to provinces to decide what megaprojects they want to fund (preferably in the public-private partnership mode).

The federal government should not be in the business of financing wasteful projects in the name of development and should stop using the development budget for offering substantial “free ride” to special interest groups.

There is a strong oversight needed over the PSDP and development budget – not to mention the full devolution of planning ministry’s role to provinces.

Need for independent budget office

Last but not the least, Pakistan does not have an independent parliamentary budget office (PBO). PBOs are independent fiscal institutions that offer impartial and evidence-based analysis to support informed decision-making in the budget process.

An unbiased input from the PBO can help parliamentarians challenge executive’s demands and proposals, and hence ensure effective oversight.

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

Published in The Express Tribune, June 10^th, 2024.

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