Budget in Simple Terms

The term "budget" is derived from the French word "bougette," meaning a small bag. It was first used in England in 1745 by the country's first Chancellor of the Exchequer, Sir Robert Walpole. When seeking parliamentary approval for financial matters, they would carry a small bag, which contained important financial documents. Later, this practice became known as the budget, and it originated in England.

What is a budget? Just as every household has a budget, every country also has a budget. The most important component of a budget is income. Without income, there can be no budget. In your household, someone is responsible for generating income, whether it's your brother, father, or husband. Their earnings contribute to your household income.

So, how does a government generate money? There are two fundamental sources of revenue: tax revenue and non-tax revenue. Tax revenue includes money collected from taxes, while non-tax revenue comprises funds unrelated to taxes. What is tax? Tax refers to the money the government collects from its citizens and companies to fund its operations. Tax is levied on almost everything, from a small biscuit to an airplane.

With this money, the government runs the country, pays its employees, builds hospitals and schools, and does everything necessary to govern. In simple terms, the entire country runs on tax revenue.

Budgets can be of three basic types: a deficit budget, a balanced budget, and a surplus budget.

A deficit budget occurs when your income is less than your expenses. In other words, your expenses exceed your income.?

A balanced budget occurs when your income equals your expenses.

A surplus budget occurs when your income exceeds your expenses.

The budgeting process involves four basic stages: preparation/formulation, approval, implementation, and audit.

Budget Preparation/ Formulation: This is the stage where the budget is created, and proposals are made according to the country's needs.

Budget Approval: The budget is presented to the assembly for approval by the people responsible for creating it.

When the budget is presented in the assembly, it contains two types of expenditures. One is the voted expenditure, which is subject to a vote and can be challenged or voted upon. The other is the charged expenditure, which is fixed and cannot be voted on, challenged, or changed. Charged expenditures are funds allocated by the government for specific purposes, and certain institutions, including the Supreme Court of Pakistan, fall under this category.

Budget Implementation: After the budget is approved, it is allocated to various projects and departments by implementing agencies and ministries. Reports are generated to track how the money is spent.

Budget Audit: The final stage is the audit. The Auditor General of Pakistan is an independent institution responsible for auditing the budget. They check how the money was spent and whether it was used for the intended purpose.

Budgets are created annually in Pakistan, covering the fiscal year from July 1st to June 30th. There are two main components of the budget: the revenue budget and the capital budget.

The revenue budget is responsible for disbursing salaries, pensions, and other recurrent expenses, and it is often referred to as the recurrent budget.

The capital budget is allocated for building roads, hospitals, schools, and other developmental projects. The capital budget also includes funds for repaying government loans.