Media Coverage

With the federal budget only a few days away, there is a lot to be worried and skeptic about

While media and people in Pakistan are still discussing whys and hows of OBL operation, preparations of another operation are almost ready. This operation is not being undertaken by American marines; rather it would be carried out by our own experts. I am talking of “Operation Federal Budget” that would be presented on May 28.

Historically, people in Pakistan used to look forward to federal budgets. Any change in tariffs, oil prices, sugar prices, etc., would have merited a lengthy debate in parliament forcing treasury benches to work hard to defend their positions. However, thanks to economic liberalisation, now most of such issues are beyond the ambit of federal budget.

Regulatory authorities such as National Electricity Power Regulation Authority (NEPRA) and Oil and Gas Regulatory Authority (OGRA) can take care of power and oil price increase on a regular basis. Under the 18th Amendment, many of the ministries dealing with public service delivery such as health and education are being devolved to provinces any way, relieving federal government of the worry to present any impressive allocations on these heads. Thus, budget is turning into a mere formality for us.

However, unlike many analysts, I would say that federal budget is still very relevant to our lives. It is an estimated inflow-outflow statement for the country. It would remind us yet again how as a nation we are still lagging behind in improving our tax-to-GDP ration.

The budget would also highlight our national spending priorities, almost half of the FBR collected income would be spent on payment of foreign debts; more than a quarter on defense expenditures; almost one quarter on day-to-day administration, keeping the alliance government intact through creation of more slots for ministers and advisors.

And then comes the Public Sector Development Programme (PSDP). Oops, there is no money left for PSDP. For the last many years, we have been linking the PSDP to foreign assistance and loans. In 2008-09, we were expecting receipts from Friends of Pakistan (FoP) forum. In 2009-2010, Tokyo Pledges were the ray of hope. In 2010-11, the dependence was on Kerry-Lugar-Berman bill payment. Unfortunately, neither any of these pledges could get mobilized (so far we have received less than half a billion dollar in so talked of KLB payments), nor people could get relief through PSDP.

As for as PSDP is concerned, I am again skeptic and don’t see any cushion in federal government’s kitty unless the spending priorities are radically redefined. However, the problem is that we are not ready to change our spending priorities and international community no more trusts in us. So, there would be no funds for PSDP and, thus, no relief for the common masses.

Another issue that I see emerging after the federal budget is a need to renegotiate National Finance Commission Award (NFC). The NFC Award was negotiated before the 18th and 19th Amendment plans were tabled.

The provinces were promised increased resources but at that time they had no idea their responsibilities would increase manifold as a result of 18th Amendment in the Constitution of 1973.

It would be naïve to expect that devolution of subjects from federal government to provincial government would be successful without fiscal devolution. This fiscal devolution requires renegotiation of NFC as well as a workable formula through which provinces may improve their tax revenue and reduce fiscal deficit.

This, in turn, requires an integrated framework and a common understanding between federal economic managers and provincial economic managers. Right now, one cannot see harmony between the federating units and federal capital on reducing fiscal deficit and masses of Pakistan would have to pay the cost of lack of such harmony.

The budget, which is prepared in complete isolation and with minimum consultation with stakeholders, would not propose any meaningful solution for various crises facing the people of Pakistan. Even then, the items that we should look forward to in the forthcoming federal budget are our allocations for energy sector and those for defense and security expenditures. I can see energy as a non-traditional security threat affecting not only our livelihoods but economic growth and potential tax base too.

Energy generation and energy distribution sectors are not only ignored during federal budgeting but whatever meager allocations are made for these sector cannot be utilised properly too. Looking at the social disruption, and political setback for lack of consistent supply of energy, one should expect that this sector be given a priority in the next budget. If this is not the case, it would yet again prove the shortsightedness of our ruling elites.

The second item that interests many in the federal budget is defense allocation. In the aftermath of Abbottabad saga, one can say that either Pakistan had provided shelter to Osama or it was completely unaware of his presence. The former scenario turns us a rogue state, and the later a failed state.

In both the situations, one must question why a major chunk of tax-payers’ money is being spent on our defense institution, which is either part of the problem or clueless about how to solve this problem.

There are demands that the defense budget be made transparent and presented to parliament for discussion. If the political forces are serious in redefining civil military relationship after OBL episode, then they ought to spend more time on discussing Pakistan’s PSDP allocations vis-à-vis defense budget.

Federal budget may not provide any concrete answer to the plight of common Pakistanis, but the minimum we expect from our rulers is an assurance that they are learning from their mistakes and are ready to redefine their spending priorities in favour of ordinary citizens. The budget speech and the budget session is a litmus test for political maturity of our elected representatives. Let us see if they are mature enough to represent us.