Estimated/projected budget 2022-2023

The federal budget is expected to be presented on June 10, 2022. As a result of excessive politicisation of the subject, the real picture is being unnecessarily mutilated. In the following paragraphs, I have endeavoured to present an Accountant’s view of the budget for the Federal Government to help the people understand the real status of Pakistan’s fiscal position.

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                                    PKR in billion
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FederalBudget             2021-2022       2022-2023
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TaxesRevenue                6129              6750
Non-taxRevenue              2080              2100
(ProvincialShares-NFC)     (3412)           (3800)
NetRevenue                  4797              5050
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Expenditure
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DomesticDebtservicing       2800              3000
ForeignDebtservicing        302                550
Defence                     1370              1500
Pension                     480                520
Subsidies                   682                750
CivilGovernment             639                750
Grants&transfers            1167              1600
Totalexpenditure            7440              8670
Deficit                     2643              3620
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This is a very optimistic position. Grants and transfers in the Federal Government expenditure includes BISP, losses of the State-Owned Enterprises (SOEs) and special grants to the provinces and projects. It also includes Kamyab Jawan Programme, etc.

As can be seen from the aforesaid estimate around seventy (70) percent of the total available resources of the Federal Government are consumed by debt servicing. With every year’s deficit, the liability further increases and the vicious circle multiplies. For us accountants this is an income statement where the entity is not a going concern with such huge liability and unless there is serious restructuring, this entity cannot sustain itself financially.

This effectively means that the hard-earned tax revenue is utilised to finance a debt that definitely needs restructuring or moratorium from the creditors.

The other item which is not seriously considered is the ever increasing bill for pensions. This has reached almost 10% of the net available resources and there is no apparent possibility to achieve any reasonable solution for it. It is strange that in Pakistan pensions without any threshold are exempt from tax whereas salary income is taxable above a certain threshold. This does not happen anywhere in the world.

The expenditure on BISP, Kamyab Jawan Programmes, etc., is totally unjustified at the federal level. It is not the job and liability of the Federal Government to undertake such activities.

I would even say that it is not in accordance with the Constitution. These steps are required to be undertaken at the provincial level as human development and other functions are devolved under the 18th Amendment. Gone are the days when the Prime Ministers used to act like Kings and dole out money from state coffers.

The federal government after the 18th Amendment is only responsible for Defence, Foreign Affairs, Foreign Trade Communication and certain other subjects. These 62 Divisions of the Federal Government, most of them pertain to devolved subjects, are not justified under the Constitution.

There can be valid and justified arguments from an accountant’s perspective, whether the Federal Government should be responsible for bearing the whole burden of debt servicing especially when the income from capital projects made from such debt is being reaped by the provinces. This will lead to another debate which I do not want to open at this stage. Nevertheless, as an accountant I am not able to match oranges with oranges.

When the actual budget is presented the nation and the media will engage itself in a blame game and discussion on unnecessary subjects.

The purpose of this article is to exhibit that there are certain constraints within which Federal Government has to operate and the reins of the engine of Pakistan’s economy do not lie on the right side of 3rd Floor of the Q Block, Pakistan Secretariat, but on the left side where there is the representative office of International Monetary Fund.

I, as a Chairman of the Federal Board of Revenue, had made a presentation to get approval even for a scheme or proposal which I consider did not require any such action. At that time I used to think whether we have actually attained independence in 1947 or is it still an illusion.

Copyright Business Recorder, 2022