Budget & wasteful expenses
Huzaima Bukhari & Dr. Ikramul Haq
It is shocking that while the number of unemployed has increased alarmingly and the poor are suffering from hunger, malnutrition and serious health issues, multiplied since the outbreak of Covid-19 endemic, the non-development and wasteful expenses of the present government like its predecessors, has increased substantially as per budget documents for fiscal year (FY) 2020-21 besides overspending hugely against the budget allocations while all the time making tall claims of “living within means” and “drastically reducing wasteful expenditure”.
What a tragedy that despite negative poor economic growth after 68 years, rising unemployment, inequalities and other multiple challenges on the fiscal front—the rising public debt and its servicing, economic meltdown, external security threats and rising cost of energy, ever-increasing rise in items of daily use by the less-privileged and those living below poverty line, surplus funds have been made available to ensure that our rulers live lavishly and enjoy extraordinary perks and benefits. The “Supplementary Demands for Grants and Appropriations” for the last many years show more fund allocations for non-productive purposes, sadly also for the comfort and luxuries of the privileged classes enjoying tax-free perquisites and benefits. This extravaganza is hurtful when we are facing, like other nations, the horrendous economic toll of Covid-19 outbreak and complete or partial lockdowns in various parts of the country.
On the one hand extra grants of billions are approved for earlier years overspending and on the other, regressive taxes have not been reduced causing more hardships for the poor. Adding insult to injury, the taxes collected are mainly spent on running the monstrous, inefficient and incompetent state machinery.
While our rulers live lavishly, Pakistan’s ranking on the Human Development Index (HDI) 2019 stood at 152 out of the total 189 countries—lower than all the regional countries of South Asia and nearly 25 million children out of school in Pakistan in denial of fundamental right under Article 25A of the Constitution of Islamic Republic of Pakistan [“the Constitution”] which says: “The State shall provide free and compulsory education to all children of the age of five to sixteen years in such manner as may be determined by law”. According to a report, “the national poverty ratio, which was 31.3% in June 2018, sharply jumped to over 40% by June 30, 2020.
In the face of above harsh and painful facts, the National Assembly on June 30, 2020 approved ‘supplementary demands for grants and appropriations’ for fiscal year 2019-20 of Rs 544.824 billion for various divisions and departments amid walkout by Opposition. Even in the challenging circumstances, the fiscal indiscipline is further deteriorated as this figure last year was Rs. 201.936 billion.
According to official documents and a Press report, more than half of the additional spending (53%) was on account of the deadly Covid-19 outbreak that is justified, but “out of Rs. 544.8 billion, an amount of Rs. 336 billion was spent through regular supplementary grants, which denies the government’s claim that it did not give any new supplementary grant”. The remaining Rs. 208.8 billion was spent by making adjustments within the budget—called technical grants. After excluding Covid-19-related spending, the amounts approved through supplementary grants, either by making adjustments within the budget or issuing new cheques, “was the result of either poor planning by all the federal ministries or less budgetary allocations”, the report adds.
It is claimed in the report that “in violation of the rules, the Ministry of Finance provided Rs. 101.3 billion supplementary budget to the Federal Board of Revenue (FBR) for the encashment of sales tax and income tax refunds bonds. However, according to the rules, the supplementary budget cannot be more than the original budget, which in case of the FBR was Rs. 4.4 billion”. As per details revealed in the budget documents, the regular supplementary grants of Rs. 336 billion—increased by 216%—got ex-post facto approval from the National Assembly. The National Assembly also approved excess demands for grants and appropriation for the financial years 2009-2010, 2010-2011, 2011- 2012, 2012-2013 and 2013-2014.
During the budget debate, the Opposition members claimed that billions were given to federal ministries and related departments but their performance was extremely poor and “bad governance was their hallmark during the tenure of Pakistan Tehreek-e-Insaf (PTI)”. They conveniently forgot that the same was also their performance since 2008 under the rule of Pakistan Peoples Party and Pakistan Muslim League (Nawaz). It was alleged that around Rs. 300 billion went into the pockets of three oil companies because of the poor policies of the PTI Government. They said that the International Monetary Fund (IMF) was given assurance by the PTI Government that no supplementary grant would be given “but it still provided in supplementary grants”.
During electioneering, every political party promises reduction in wasteful expenses, austerity, fiscal reforms, economic growth, employment, and social protection for the poor, but on assuming power extracts more taxes for “luxuries” of ruling elites— militro-judicial-civil-complex and businessmen-turned politicians. What makes the situation more painful is the fact that their leaders and rich members pay paltry taxes (Tax Directories of Parliamentarians from 2013 to 2018 testify to it), yet FBR and National Accountability Bureau (NAB) take no action under the law.
In the Budget in Brief (Budget 2020-21), the government has revised “over-all budget deficit from 7.1% to 9.1% of GDP”—an all time record high. The excuse that it is due to coronavirus is not plausible as performance of the government in the first nine months of the FY 2019-20, prior to this endemic, was highly unsatisfactory as it was missing all targets of growth in various sectors and massive revenue shortfall in FBR. There was high inflation and discount rate plus sluggish economic activities leading to unemployment and rising poverty.
Total expenditure for 2020-21 is estimated at Rs. 7.1 trillion against the total revenues—tax and non-tax of 3.7 trillion. Current expenditures are Rs. 6.3 trillion against development expenditure of Rs. 792 billion, out of which allocation for public sector development programme is Rs. 650 billion. The comparison between development and non-development allocations tells the real story. After debt servicing [this year allocation is Rs. 2946 billion against last year amount of Rs. 2891 billion], the gigantic size of government machinery eating up the revenues.
The massive current [non-developmental] expenses contained in Demands for Grants and Appropriations for Budget 2020-21 include millions for payment of salaries, perks and other facilities. The number of ministries, divisions and departments etc are 180. For example, in the case of ‘Cabinet Secretariat’, current demand of Rs. 277.9 million includes Rs. 30,371,812 under the head “Miscellaneous Expenditure of Cabinet Division”, Rs. 1,160,022 under the head “Establishment Division” and then Rs. 4,280,242 under the head “Other Expenditure of Establishment Division”. This is by way of illustration to show what an ugly game is being played with the nation! One can go on the website and see the kind of absurd details proving huge wasteful expenses for the remaining 179 governmental institutions/departments/divisions etc! Then the figure in billions of losses in public sector enterprises and what they call circular debt in energy sector!
The above spending/losses would not improve the plight of masses, majority of whom are deprived of basic life amenities guaranteed in Article 9 of the Constitution as inviolable fundamental right discussed in detail in the famous case of Ms. Shehla Zia v WAPDA [PLD 1994 Supreme Court 693]. This confirms extreme apathy of rulers towards the citizens and voters and inner story of our budget making.
According to holders of public office, cuts in their expenses will not make any difference in improving economy as share is very small. They forget that their priority should be the masses and self-comfort from taxpayers’ money. They should read Article 3 of the Constitution which says: “The State shall ensure the elimination of all forms of exploitation and the gradual fulfilment of the fundamental principle, from each according to his ability to each according to his work”. If this promise is not fulfilled how can the State ensure obligation imposed under Article 5(1) that “loyalty to the State is the basic duty of every citizen”. The Constitution is a social contract between the State and citizens. Any infringement on the part of Legislators cannot be taken lightly.
It is a pity that successive governments have failed to bridge the gap between current expenditure and tax revenue and then most of the resources are being wasted ruthlessly as discussed above on dozens of ministries and divisions. Pakistan can never come out of this mess unless wasteful expenses are drastically cut, tax leakages are plugged and untapped resources are utilised that include imparting skill-based training to millions of youth, who after receiving paper degrees, are properly employed.
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The writers, lawyers and authors of many books, are Adjunct Faculty at the Lahore University of Management Sciences (LUMS).