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The annual budget: an exercise in futility

Budget season is here. People can’t stop talking about it. The media is abuzz and experts are in full demand (and full swing) to spill their pearls of wisdom about it.

And again, the PM ‘directs’ the FM to prepare a ‘people-friendly’ budget which provides ‘relief to the common man’. We have been reading and hearing the same statement since childhood, to the point that now it is just boring. So let me propose the unthinkable: that the budget constitutes a futile exercise and a waste of resources.

The exercise of presenting a budget (the word is derived from ‘bougette’, a French word denoting a wallet) was first done in the context of an economic and credibility problem. Without going into details, it was aimed solely at restoring the confidence of the public in the government’s fiscal operations (expenditures and income). By 1764 it had become a regular feature of British parliamentary discussions after Lord Grenville presented the first budget in order to let people know that the government was making a serious effort to bring back the surpluses. Thus began the tradition known as the annual budget. This practice first came to the Subcontinent in 1869 when James Wilson, member of the finance committee to the viceroy, presented the first budget statement that year.

Let’s start with the statement of fiscal operations and the confidence of the people. The numbers presented in the budget are merely ‘intended’ numbers – not real. Rarely (if ever) do the real fiscal operations over the year mirror the intended numbers exactly. And the reasons for this range from the political to the purely economic. Those who govern have their own priorities, and sticking to intended fiscal plans is not one of them. One would be hard pressed to find the Rs450 billion paid to he IPPs in any budgetary statement. In essence, priorities like these are not the outcome of some fiscal prudence, but rather a reflection of a political intent. There are hundreds more examples like this one, only confirming my point that budgetary numbers are a mere statement rather than substance.

The statement of fiscal operation can be found on the finance division’s website or in the quarterly reports of the state bank, etc. For year-end fiscal expenditures, one can always grab the AGPR and CGA booklets or other publications like these. Therefore, there remains little need for presenting intended figures. This futile exercise closely mirrors the ‘plans’ made by the Planning Commission. There is not one such ‘plan’ in Pakistan’s history that has even come close to realising its intended targets. The basic point is that the future is too uncertain to form preconceived plans. As for peoples’ confidence, there are no marks for guessing what people think about the credibility of governments in Pakistan. What ultimately happens is that, for this whole process, people end up paying a heavy price for this whole exercise.

Let’s now move to the price that is exacted from the people of Pakistan through this process. Start with the very process of coming up with expenditure estimates for the next fiscal year, the majority of which are non-development ones. The smaller portion goes to development expenditures, where there is an inherent bias towards starting more projects just for the sake of it (government servants get double the pay in projects, plus there are more vacancies to choose from). There is little in terms of coming up with anything intuitive or non-ordinary that could make a real impact as far as pressing problems are concerned.

If that were the case, Pakistan wouldn’t be facing so many problems despite presenting budgets regularly since its inception. In essence, the budgetary numbers and estimates are propagation of a system that is completely out of sync with the times, and has little theoretical justification. Pick up the ‘pink books’ of budgetary figures over the years and try coming up with a difference between them. You won’t find one except for numbers. This system is maintained by the money exacted out of the people of Pakistan through various means.

Another cost comes from departments trying their utmost not to surrender their unspent amounts. This point is amply demonstrated by what I call the ‘digging season’. This season begins almost every year around February and continues up till the presentation of the new budget. Also notice that these digs are almost at the same place as before. These digs, in most part, are not the outcome of a benevolent administrator feeling the need to do some real work. Rather, they are an attempt to show on paper that the unused amounts have been ‘utlilised’.

This wasteful exercise takes place every year because nobody is interested in asking questions or inquiring into this practice. Which government functionary or administrator, for example, has the time to go check the digs and ask about the logic behind it? Moreover, government departments are woefully short in terms of capacity and quality HR to check these practices.

To further my point, another example from my own experience of working with a government department a few years back. An institutional demand for Rs12 million was met with a release of Rs62 million, just to avoid surrender of funds (the money was released a day before the surrender was due). The extra 50 million expenditure ended up in government statements as financial assistance to the poor!

Now here’s why this particular instance constitutes a price to the people. The institution in question was a bank, and banks provide money to the government (for debt financing) at exorbitant interest rates. This extra Rs50 million that ended up with the bank, owing to a political and personal favour by ‘competent authority’, does not cost that bank anything. It’s a freebie, on which it must have earned millions through either interbank lending or other such mechanisms. And who bears the cost of this? The people of Pakistan. Mind you, I just gave one example. Every year, billions get ‘utilised’ like this.

It’s also quite a sight to see the printed budget books being escorted from the FBR by heavy security. Billions are spent on publication, and hardly anybody reads them. Even in government departments, the need arises when one has to search for a particular number. Why not just prepare simple excel statements (department wise) and put them up on web for everybody to see? Why waste billions?

It will be pertinent to mention here that before the arrival of the budget, goods of everyday use (from food to other items) disappear from the market. Ask a shopkeeper or retailer, and they will simply say that the budget is coming. As the price level shoots up to new highs, people are left in more misery than before. Thus, the arrival of budget serves as a convenient excuse for hoarders to hoard commodities of daily use. Why not take this excuse away from them?

In conclusion, the whole exercise around preparing and presenting annual budgets constitutes a waste of resources. At best, it’s a mish-mash of lofty ambitions that forever remain unfulfilled. Instead of presenting plans for the future, which is always too uncertain, why not just go for on-demand utilisation of resources through prioritising tasks? Schemes made otherwise are mostly meant to curry favours and realise some financial windfall, and have nothing to do with solving real peoples’ real problems.

The writer is a freelance contributor.

Email: shahid.mohmand@gmail.com

Twitter: ShahidMohmand79

Shahid Mehmood, "The annual budget: an exercise in futility," The News. 2015-06-04.
Keywords: Economics , Economic issues , Economic system , Economic policy , Economy-Pakistan , Budget , Economic growth , Economic inflation , Economic development , Economic planning , Annual budget , Fiscal plans , Pakistan

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