Budget 2016-17 took a mere 19 days after it was announced in parliament on 3rd June, including holidays, to be approved by the National Assembly – a budget formulated on the basis of flawed data, a revenue base heavily reliant on indirect taxes whose incidence on the poor is greater than on the rich with around 4 billion dollars to be borrowed from the foreign commercial banking sector at high interest rates and the short-term.
Expenditure priorities that were marked by a rise in outlay on running of civil government, excluding salaries, and a federal Public Sector Development Programme (PSDP) that focused on roads (188 billion rupees) instead of power (130 billion rupees).
However, the speed at which the budget 2016-17 passed has, unfortunately, become the norm in this country. According to Pildat, during the past decade the National Assembly of Pakistan spent only 10 days on average every year on budget scrutiny after the budget was tabled in the House; and added that this timeframe and the process do not allow parliament the time to scrutinise the budget in detail before its passage.
This task has been made all the more challenging by the incumbent Finance Minister, Ishaq Dar, who redefines several revenue and expenditure items each year and parks them where they may be difficult to locate. An example is his claim in his budget speech that “from 1st July 2016 the government has decided that the price of urea is further reduced to 1400 rupees per bag.
In this instance, just as in the past, the federal and provincial governments will pay the cost of the subsidy which will be 36 billion rupees in equal shares… with effect from 1st July the price per bag of DAP will be 2500 rupees. In this instance, just as in the past, the federal and provincial governments will pay the cost of the subsidy which will be 10 billion rupees in equal shares.”
There is no mention of a 23 billion rupee subsidy payable by the federal government in the subsidy section and its exact location still eludes Business Recorder.
Be that as it may, the Senate and National Assembly standing committees did make some appropriate suggestions which were accepted by the Finance Minister, including the offer to withdraw input adjustments between provinces and the federal government if the matter of receivables and payables is settled amicably by 30th June 2016.
Unfortunately, none of these recommendations focused on the need to reprioritise expenditure but on revenue measures and here too the focus was not on income tax (though corporate income tax came under discussion) or indeed on taxing on the ability to pay principle rather than indirect taxes whose brunt is borne by the general public.
Thus specific suggestions were made with respect to the rate levied on a specific industry.
The budget debate by opposition members is typically lacklustre to say the least and while the Finance Bill requires a simple majority to be passed, which the PML-N government certainly has, yet one would have hoped that the opposition had used the platform to first criticise and subsequently make informed recommendations.
Disturbingly what galvanised the parliamentarians across party divide was an increase in their own salaries and perks – to bring it up to the same level as a Grade 22 officer’s.
While few would object to this parity, yet this envisaged a rise from 36,000 to 200,000 rupees per month or a whopping 450 percent which cannot be justified given the state of the government’s finances.
While there are few economists in parliament, with many considering themselves to be experts based on their successfully having run large corporations yet it is critical to acknowledge that an economist focuses on the macroeconomy (or all sectors) and a Chief Executive Officer focuses on micro units, however large.
The expertise required is thus distinct. Pildat came up with a good proposal in this respect and suggested that “keeping with growing international trends, Pakistan’s parliament should consider the establishment of an independent budget analysis unit in parliament that should be staffed by experts able to provide unbiased information relating to the budget and independent analysis for the benefit of parliamentarians”.