That is a big setback. The overall picture hides the hideous truth that it is the social and development parts of the budget that were cut to provide for utterly unnecessary non-development expenditure. Having had the signal honour of presenting the 5th budget in a row, one would assume, that the FM had honed his skills to be able to stay close to the reality.
Defence Affairs and Services (a new nomenclature) exceeded the budget substantially by 13%, having spent Rs 180bn against Rs 160bn. Next year the budget for defence has been raised to Rs 194 bn, which is an increase of 11% over original budget of last year. General Public Services also posted an increase of 21% from Rs 645 bn to 714 bn.
As suspected there was a decline in development expenditure from Rs 160bn to 154bn. Even this figure is likely to conceal some failures because it often happens that the money is released to the government organisations towards the end of the financial year when it is impossible to spend and the departments keep the money in accounts, characterised for the purpose as PLA (Personal Ledger Account) so as to avoid lapse of the budget.
Wapda does it routinely and credits itself with progress by simply transferring funds, say to the government of Punjab for land compensation, which may take years to reach the landowners. Thul Canal would be a good example. Development is the vulnerable side of the budget and is easy to trim. Non-development is very dear to the rulers and always exceeds the budget estimates.
Not surprisingly the poor management of Public Sector Development Program (PSDP) resulted in a decrease of Rs 6bn. Next year it is claimed that an increase of 31% over revised estimates for the previous year has been budgeted. This is a public relation exercise because eventually the expenditure will be much less than budgeted.
That is the wont of unrepresentative governments. Another problem with allocation under PSDP is its nature of being a bureaucratic exercise, which does not take into account the principle of equity as between provinces.
Federal investment on current account is a misnomer and conceals undeserved and unjustified subsidies to inefficient organisations like WAPDA, KESC, PIA and Utility Stores Corporations at the cost of the taxpayer. WAPDA received Rs 34.5bn last year in spite of five years continued stewardship by a know all and do all General.
Next year the budget provides no subsidy. But that is no guarantee that a subsidy will not be given, although chances are slim because Wapda is headed not by a general. PIA in spite of claims to have made profits, will receive Rs 4.8bn as against Rs 4.9bn it received last year.
Total expenditure under this account would be Rs 5.4bn against Rs 41 bn last year. Why aren't these organisations being privatised? Simply because they provide highly paid cushy jobs to the retired from the military.
In spite of loud noises against external borrowings, the budget provides for external resources at Rs 156 bn against the revised budget of 145 bn. So there is an increase and not a decrease as claimed. In the outgoing year, under external resources, it raised Rs 145 bn against a budget of Rs 159 bn. There was a decline under project loans and programmes loans and similarly under the head "other aid".
That was good news. What was not good was the introduction of euro bonds. Without there being a budgetary provision, the government went ahead to buy euro bonds worth rupees 29 bn. Bank borrowings increased from 28bn to Rs 74 bn -almost three times. They have budgeted Rs 45bn next year and are likely to exceed it by twice as much, if one goes by the trends.
Government performance on revenue generation has been impressive. It generated more revenues than it budgeted. The two figures are Rs 761 bn against Rs 78 bn. But it failed to control the other side of the equation, that is the expenditure. It, therefore, borrowed heavily in spite of disclaimers.
Transfers to the provinces show an increase from Rs 256 bn to Rs 296 bn. After interest and loan repayment of Rs 39 bn, which is a rip off, money having been lent at usurious rates.
The provinces will be left with Rs 257bn. The Federal Government admits its inefficiency in the matter of collection and charges an exorbitant five percent for all the taxes except income tax for which its charges 6%. This is doubly depressing because the provinces get only 37.5 % of total resources under an outdated unconstitutional 1997 NFC Award.
There have been few cosmetic innovations in the budget. Like they have introduced a catch phrase 'Affairs' and Services', which they have suffixed to the Ministries of Education, Defence and Health etc. Education registered a small decline in the outgoing year. In the absence of any evidence to show that education improved it is more than likely that the money has been stacked somewhere and most likely with HEC (Higher Education Commission).
Economic Affairs registered a substantial degradation with decline in expenditure of 29% from Rs 78bn to Rs 55bn. The break-up shows largest single chunk of allocation going towards tertiary education. Administration alone would cost Rs 821m that is almost a billion. Cost of delivering education is excessive, it seems.
A new chart of accounts has been created this year and bulk of expenditure has been booked under General Public Services (GPS). It has been claimed under budget "an amount of Rs 349.5 bn will be consumed by executive and legislative organs or 50% of the current expenditure, 27.6% for defence, 7% for economic survey and 1.74 % for education.
GPS includes Rs 42.5 bn towards pensions, mostly for the defence personnel, Rs 44 bn towards servicing of foreign debt, Rs 51 bn towards foreign loans repayments and Rs 170bn towards servicing of domestic debt. Most of the borrowings are defence related. Administration of GPS is a small component of this new chart of account involving only Rs 422 m.
Under Public Order and Safety Affairs, which sounds like a joke in view of the public order which has broken down and where even Corps Commander is not safe, receives Rs 15bn against Rs 12.9bn in the previous budget. This head includes law courts, fire protection and prison administration. All three have received a miserly Rs 0.5 bn, with no increase over the previous budget. One has to see the courts in Islamabad to believe the criminal neglect of the government. The poor judges don't have an appropriate office or adequate furniture.
The only thing the present rulers have been crowing about for the last five years is a pile of foreign exchange reserves and a buoyant stock exchange.
The first achievement has become a subject of speculation about the missing Rs 25bn and the latter was brought down crashing by business friendly Finance Minister with his ill advised CVT in this budget. It is like slaying the goose that laid the golden eggs. So there go the two crowning achievements of these WB/IMF/Citibank whiz kids. CVT will be withdrawn like the much hyped property survey forms few years back, proving right the Punjabi adage of 100 onions and 100...
The issue that the budget is obviously skirting like the previous ones is the choice between bread and butter on the one hand and security on the other. Since the present government is all about security, the choice has been convincingly made in favour of security.
The choice having been made against the people and in favour of the vested interests, this budget or ten more like this will make no difference to the fate of the people. So the budget is a non-issue. We belabour as a part of annual ritual.
The claims of the government to a phenomenal growth rate are predicated more on the change of base year rather than on real progress. Dismal rate of growth in agriculture for two years running admitted by the government has been blamed on God who did not give rains or whatever, but not on the misguided policies this government pursued relentlessly.
The cost of inputs including electricity was high except for water, which continued to be heavily subsidised. Grower was denied his rightful price through foolish interventions like in the case of wheat when its movement was banned and wheat trucks were raided in the name of preventing hoarding.
Agriculture, which employees 42% of the labour force and contributes 23% of the GDP has received huge publicity and low allocation. In the new budget a provision has been made for Rs 903bn as against 805bn in the previous budget. Yet this budget provides only Rs 4b for agriculture, food, irrigation, forestry and fishing, all together; out a total outlay of Rs902bn. This is almost half of what was allocated last year.
The budget was preceded by announcement with so much fanfare in the Presidency of an agriculture package, which contains nothing, added nothing to the prospects of agriculture.
The basic problem of employment, poverty and growth could only be addressed if fundamental reforms were introduced in agriculture. This involves ownership rights for the tillers, which all the previous governments and the present one religiously avoids granting.
The Prime Minister showed great deal of courage by declaring that there won't be any land reforms. There is enough literature to prove that higher growth and greater employment can be achieved if huge land holdings are parcelled out to the cultivators.
If that is the kind of ballyhooed performance, the Ministry of Finance and particularly her FM should decide to opt out gracefully. But that is a vain hope. We will continue to wallow in the muck.