Government lacks legitimacy to announce budget this month: experts

The upcoming budget is based on data from seven to eight months

ISLAMABAD: As the government has decided to announce the budget for next financial year 2018-19 by the end of this month, experts claim the ruling party lacks the legitimacy to announce a budget on the basis of data of only seven to eight months.

According to experts, there was no need to prepare a budget based on projected figures as by the time of its announcement, only eight months of fiscal data would be available, while the figures of the balance of payment will be based on the seventh month. “The government should have left it to the interim and next governments. The interim setup can take budgetary measures for three months, while the next government, to be formed by early July 2018, can present the budget of the whole financial year,” said a leading economist in terms of anonymity.

“This is highly unjustified that the Ministry of Finance has submitted the internal budget to adviser to Prime Minister on Finance and Revenue Miftah Ismail last month. It makes no sense to announce the budget two months early,” he said.

“What is the use of such a budget when it is sure that the next government would drastically change the budget documents while introducing a mini budget through the Economic Coordination Committee (ECC), as was done by the former Finance Minister Ishaq Dar in 2013? The government is preparing the budget in haste,” he added.

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Commenting on the issue, Sustainable Development Policy Institute’s (SDPI) Deputy Chief Executive Dr Vaqar Ahmed says “It is unclear how the government will prepare a budget based on perhaps eight months of data. There would be a large variance in projections. Furthermore, the next setup post elections may not regard the federal budget presented in April and this may end up with the next government announcing a series of mini budgets. Ultimately, this reduces the spirit of planning and budgeting in line with national consensus-driven priorities.”

The PML-N government has announced to give fiscal year 2018-19 budget on April 27th, almost five weeks before its five-year constitutional term comes to an end. This will be the sixth budget that the present National Assembly will approve.

Interestingly, despite the strong reservations being shown by economists and financial experts, all major political parties are largely silent on the issue, apparently, they want the government to give a highly unpopular budget at a time when the ruling party is in a fix to manage budgetary matters. “None of the political parties have objected to presenting the sixth budget by the ruling party PML-N,” said an official at the ministry of finance adding that there is no legal hindrance in presenting the budget early.

“The government wanted to clear all development budgets by the elected parliament, as needed by existing law. The ruling party, by presenting the sixth budget, will be able to introduce new development projects/schemes for the next financial year. However mega projects, if introduced, might not get financed later as the new government would prioritise projects of their choice,” said insiders.

According to insiders, apart from difficulties regarding data for preparation of next budget, the government is also facing a challenge of financial needs keeping in view present economic situation, in which fiscal deficit is all set to cross 6 per cent, much higher of than the four per cent projection made by IMF.

The government is eagerly looking for financial assistance from friendly countries like China, Saudi Arabia, Kuwait and Turkey but the major financier, China has stopped giving short term loan from February. The government is also not going for further Sukuk or bond arrangements and it is also avoiding further loans from IMF ahead of the next election, while scrambling to manage the exchange rate. 

Meanwhile the government has to pay at least $5 billion as debt repayment besides making arrangements for payments of around Rs1,200 billion of public sector enterprises, losses, and ballooning circular debt which is expected to be Rs1,000 billion in the next couple of months. It is around Rs900 billion presently.

However, an official at the finance ministry claims that the government will succeed in convincing friendly countries including China for further loans. Besides, it could fetch at least $5 billion through the upcoming offshore tax amnesty scheme.

According to sources, keeping in view the shortage of finance, the finance ministry is going to cut the development budget to Rs800 billion for the next fiscal year as compared to Rs1,001 billion, which the Public Sector Development Programme (PSDP) introduced in budget of 2017-18, with almost Rs201 billion or 20 per cent less than the budget for the current fiscal year ending on June 30.

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Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]
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