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RE-Engineering the Fiscal Budget of Pakistan
Muhammad Waqas Raza Siddiqui
C.A Finalist, ICAP.

Cell No. 0345 28 99 607 Email Id : waqasrazas@hotmail.com

The National Budgeting process of Pakistan fails to entertain and cater the national aspiration of the fiscal demands and people, hence severely disappoint year by year the people and the institutions of country every time. To fill this , this paper considers a number of Problem areas in Budgeting Policies, Processes, and Priorities along with concise yet clear indicative studies, it also discuss whether adopting such a budgeting system after revisiting the entire process can meet the country’s fiscal needs in an Endeavour which fulfill the demand and aspiration of Country and its fellow men, For sure Pakistan needs to redesign features and accommodate such into its budgeting system to ensure that it does so what stated above.

The policies that are under examination in this study are of the vary primal in nature, the discussion would only revolve around the two basic cores of policies, first regarding Fiscal, Disarray of National Budgets, as have always been adopted and secondly the Diasporas the Pakistani economy have long been suffering from but still not addressed in Budgeting, causes not only the hindrances to economic growth but the entire fiscal Budgeting mechanism have always been the first and foremost sufferer.

The priorities that incubate to become the biggest obstacles in not only the entire budgeting process but of the Pakistan’s slow and sluggish growth right from the independence are of no dispute, however some may disagree beside being evident of the lethal affects of aforesaid, on other grounds purely of non economical reasons along with of the little worth at the same time. The huge scale Defense expenditure as always been the biggest priority in the books, along with the latest decay long development paralyzing war against terror which affect economy deeply in no time from the first day it was brought in the lands of pure.

Finally, the processes do cover only the aspects of fiscal resources or revenue generation arrangements, mainly and directly constitute of the tax system of any country, and the expenditure it does to attain the prospects and objects of budget.

Conventional Fiscal Performance Cycle
In any conventional fiscal cycle the role of Budget can be illuminated by the help of following simple yet powerful diagrammatic cycle, In context of Pakistan and our aforesaid three pillars, of fiscal Budget we have considered, if we suppose the Long terms Structural Determinants, Contemporary Politics and Fiscal Institution in the given diagram equivalent to respectively the Policies, Priorities and Processes of our study manifestations, the picture would be quite clear and grasping. The need to over tide the diagram with our assigned tags is to establish the vivid connection of our study with global perspective which we are about to explore and construct.

Chapter 01

National Fiscal Disarrays
Fatal Mistakes , Fallacies in Public Policy Making
Healthy people healthy country Human Capital Neglected severely (Hospital and Training etc) Sorry state of Education Secure State or Scarce State

Particularly, in case of Pakistan, the foremost plight as always been of the plight of Policies, The disarrays, from the policies undermining the socio economical important sectors being taken for granted such as Health care, Education, Justice and so on to the policies creating embargoes for afore said sectors by giving so much importance to lesser deserving sectors. I called such are Fatal Mistakes, always observed in setting the fiscal budgets and their directions, leading to sluggish growth in regions comparatively and lesser poverty reduction hence lesser affective fiscal developments
Planning Fiasco Conflict of Interests, Never been reduced Unsustainable Growth, Reparations Sick orientation, Services or Manufacturing or Agricultural Economy?? Economy??

Chapter 02

Fiscal Disasters in Pakistan
The governments mainly relied on borrowing as the only measure of “practical and political value” for easing Pakistan's balance-of-payments difficulties. But because the credibility was less than perfect, loans from international institutions and banking systems, in addition to inter-governmental credits were mostly on a short-term basis and often with higher interest rates. When credibility worsened -coupled with limited borrowing possibilities, repayment of these accumulated short-term loans became a real burden on the economy Corruption Instability Unsustainable Growth

Chapter 03

Defense or Demise and War against Terror or Economy??”
Pakistan’s economy is under pressure of the War on Terror intensifying for last four years in Afghanistan. Since 2006, the War has spread like a contagion into settled areas of Pakistan that has so far, cost the country more than 35,000 citizens,3500 security personnel, destruction of infrastructure, internal migration of millions of people from parts of northwestern Pakistan, erosions of investment climate, nose diving of production and growing unemployment and above all brought economic activity to a virtual standstill in many part of the country. Pakistan had never witnessed such devastating social and economic upheaval in its industry, even after dismemberment of the country by direct war.



Which are, at present, the main “technical” and "political” difficulties in the way of making progress towards obtaining international agreement s to reduce military expenditures? What is the nature and scope of the interrelationship between “technical" and “political " elements with regard to agreement s to reduce military expenditures? In which way might agreement s to reduce military expenditures be related to other disarmament agreements?

Economy craving Energy!

The link between sustainable development and energy will require even greater efforts for long term energy security. Crisis management including installation of rental power plants in the private sector and reduction of peak demand through energy conservation and load management measures

The sector which should have been the most prioritized one, remain neglected for long, the ignorance harvested country into darkness

Chapter 05

Borrowings in fact Burrowing to Ditch
Although somewhat insulated from the financial crisis, Pakistan too has witnessed a rise in public debt in the recent past. Fiscal profligacy in the shape of large subsidies, policy inaction with regards to rising oil prices in 2007, weak revenue collection, pressure on budgetary resources placed by a heightened security situation, and efforts to eliminate the inter corporate debt in the energy sector, have led to relatively rapid increase in public debt. The cumulative effect of the depreciation of the Rupee against the US dollar, on the one hand, and the weakness of the US dollar against third currencies in which a significant portion of Pakistan’s external public debt is denominated, have also played a substantial part in the overall increase. The total public debt stood at Rs.8,894 billion as of June 30, 2010, an increase of Rs. 1,265 billion or 16.6percent higher than the debt stock at the end of last fiscal year. Government borrowed Rs.798 billion from domestic sources and Rs. 189 billion from external sources to finance the fiscal operations. Additionally, government borrowed SDR 2,145 million or Rs. 271 billion from IMF for balance of payment support (that included budget support under the bridge financing facility) and incurred an exchange loss of Rs. 200 billion on the external debt portfolio owing to rupee depreciation against US dollar. The Pak Rupee depreciated by 5 percent during FY2010 compared to 19.2 percent in FY2009.

Chapter 06

Original Sin, Tax evasion
The most corrupt departments in Pakistan are the tax departments. "FBR has the reputation of being corrupt, besides being one of the most politicized departments of the Government of Pakistan. From the office of the chairman to middle and lower ranks, appointments are made in FBR on political and financial considerations. One frequently comes across people in Islamabad with offers of money for appointments or postings in departments under the jurisdiction of FBR. The amount that these people offer, even for a clerical job in customs, income tax or other subordinate departments give a measure of corruption and graft in FBR. . . It is thus not mere coincidence that the chairman of FBR has invariably been the first to go with each change of government since 1988 The level of tax evasion was about Rs.1.5 billion in 1973, which tremendously increased to Rs.152 billion in 1996. It is also noteworthy that "the underground economy grew faster than the formal economy. The underground economy grew annually at the rates of about 27 percent, 14 percent, and 26 percent in 1970s, 1980s, and 1990s correspondingly while growth rates in the formal economy for the same sub-periods were about 18 percent, 14 percent, and 17 percent."

Chapter 07

Considerations, in Public sector finance in Pakistan
Recommendation in “National Fiscal Disarrays”
Healthy people healthy country Human Capital Development Prioritizing of Education

Suggestions by the chapter “Fiscal Disasters in Pakistan”
Branding Outlook Stability Democracy Legal Enforcement Expectation Fiscal Corruption Control Measures Absence of unified common greater nationalist agenda, like in US Viability of Economical Succession

These are some recommendations in " Defense or Demise And War against Terror or Economy??”
You can Change your Enemy but not your neighbors” Reduce Huge defense Expenditure Save such Opportunity Cost of Such Huge Scale Resource Burning Rigorous all-round debate, whether This US led war is, war against Terror or Economy

It Became inevitable as per chapter "Economy craving Energy!”, that
To improve supply-demand balance through additional least-cost power generation, bottleneck transmission and distribution systems; Reduce subsidies and allowing cost recovery tariffs by distribution companies; Inject cash into the sector to stem asset deterioration; strengthen corporate governance by Discharging ownership responsibilities; and Toughen sector policies and regulations.

Strongly recommended in "Borrowings not burrowing to ditch”, for deficit financing…
International Trade Debt re sheduling Forex Exchange measures Major recommendation for “Original Sin, Tax evasion” Levie tax on basis of paying as much as earning Measures to extend Tax net