A show of priorities
The finance minister made a long enduring speech in the national assembly, he faced the press in question-answer sessions and he accepted 20 wholly and 15 partially out of the 90 recommendations made by the Pakistan’s Senate on the House’s floor, salaries were increased from 7.5 to 11 per cent. The budget is all ready to be adopted as a finance bill by the parliament of Pakistan in a few days, and then normal working of the government starts for another year.
The budget
The total outlay of the budget for 2015-2016 would be Rs4,451.3 billion and the resources are estimated to be of Rs4168.3 billion or a shortfall of Rs283 billion. The budget document (Budget in Brief) shows that in the revised estimates of 2014-2015 the resources had decreased by almost six per cent (5.9 per cent) and were Rs3,833 billion, whereas the increase in the current estimates is of Rs469 billion from actual resources of the last fiscal year.
Budget 2015-2016 envisages current expenditures of Rs3482.2 billion (78 per cent of the budget) and development expenditures of Rs969 billion (22 per cent of the budget). The document at the same time shows that in the revised estimates of 2014-2015 the share of current expenditure increased by Rs18 billion while the share of the development budget decreased by Rs84.2 billion.
The revenue
In 2014-2015 the government’s revenue from internal resources decreased by Rs83 billion and still the finance ministry is estimating to collect Rs3,367 billion in 2015-2016 or Rs245 billion more than actual resources collected from internal sources of last year which includes surpluses from provinces of Rs141.5 billion in the revised budget and is estimated at Rs297 billion in 2015-2016. When the provinces need more resources to spend on development of social and economic sectors the question can be asked as to why they have to have a surplus budget in order to finance the federal budget which cannot fulfil its targets of the previous years.
Budget 2015-2016 envisages current expenditures of Rs3482.2 billion (78 per cent of the budget) and development expenditures of Rs969 billion (22 per cent of the budget)
In the 2014-2015 revised budget estimates it can be seen that although amount from internal resources declined from the estimates of 2014-2015 (it can also be seen that the decrease was because of the decrease in provincial surplus and decrease in capital receipts to an amount of Rs74.3 billion) but the amount from net revenue receipts in that year increased by Rs152.4 billion (because of an increase of Rs226 billion in non-revenue receipts) and is again envisaged at Rs2,463.4 billion in 2015-2016 estimates.
It is interesting to note that in the revised tax (FBR) receipts for 2014-2015 decreased from envisaged Rs2,810 billion to Rs2,605 billion (a shortfall of Rs205 billion) – direct tax collection had a shortfall from the envisaged amount of Rs71 billion and indirect tax collection had a shortfall of Rs134 billion, while non-tax revenue increased with an amount of almost Rs226 billion and the provincial share in gross revenue decreased from the envisaged amount of a sum of Rs145.5 billion. In other words the data shows that when FBR did not succeed in fulfilling its estimated targets of collecting both direct and indirect taxes, the proceeds from privatisation also did not meet envisaged targets, and the provinces share in gross revenue also decreased in the revised estimates of 2014-215. In the revised estimates of budget 2014-2015, collection from direct taxes from income had a shortfall of a little more than Rs72 billion. Under the indirect heads in the revised estimates, custom duties had a shortfall of Rs26 billion and sales tax had a shortfall of Rs89 billion and Federal Excise Duty had a shortfall of Rs19 billion. Other indirect taxes (ICT) had a shortfall of Rs615 billion, Airport Tax had a shortfall of Rs15 billion but petroleum levy increased in Pakistan of an amount of Rs3 billion even when international oil prices (and subsequently domestic prices on petroleum products) were reduced in 2014-2015.
The share of direct and indirect taxes in total tax revenue in 2015-2016 is envisaged as 60 per cent from all sources of indirect taxes and 40 per cent from direct taxes.
External resources of the revised estimates in 2014-2015 increased from Rs670.6 billion to Rs692.7 billion (an increase of Rs22 billion) and are envisaged in this budget to increase to Rs751.5 billion, which certainly would increase the public debt of the government.
Regarding borrowing from banks in 2014-15, revised estimates increased manifold from Rs228 billion to Rs402.3 billion (an increase of Rs174.3 billion) which would have created a serious crowding out effect and would have left the private sector of the country with a lesser amount, thus reducing their profit margins in an already fragile economic atmosphere. Budget 2015-2016 has envisaged bank borrowing of an amount of almost Rs283 billion.
The privatisation proceeds in 2014-2015 were envisaged at Rs198 billion when the government was able to collect only Rs17.8 billion or a shortfall of Rs180.2 billion which shows serious issues in the privatisation policy and then the government is envisaging to sell state assets worth of Rs50 billion this current year.
Current expenditures
Of the Rs3482.2 billion current expenditures envisaged in Budget 2015-2016, 70.26 per cent will be spent on general public services, and another 23 per cent on defence, or a total of 93.26 per cent of the current budget allocations. The rest 6.74 per cent would be spent as — 3.0 per cent on public order and safety; two per cent on Education; and 1.7 per cent on economic affairs. Which comes to 98.26 per cent of the entire current expenditures leaving less than 2.0 per cent (1.74 per cent to be precise) for health (0.3 per cent), recreation, religion &culture (0.2 per cent), housing & amenities (0.07 per cent), social protection (0.05 per cent) and the environment protection (0.03 per cent), which certainly show the priorities of the federal government on such important issues as social protection, or the environment, health, housing and even education.
In the revised estimates of 2014-2014 there was an increase in the current expenditure from the estimated projections of an amount of Rs17.4 billion. This increase was in defence (of Rs20 billion), economic affairs (of Rs7.7 billion); social protection (of Rs1 billion), public order and safety (of Rs1.1 billion) and education of Rs0.5 billion or a total of Rs30.3 billion. There was almost no change in estimates and projections in the heads of environment, health and housing, but there was a decline in spending of Rs12.9 billion in general public services in revised expenditures of 2014-2015.
The share of direct and indirect taxes in total tax revenue in 2015-2016 is envisaged as 60 per cent from all sources of indirect taxes and 40 per cent from direct taxes
Among the general public services allocations for 2015-2016 almost Rs1,773 billion are envisaged for debt servicing of domestic and foreign debt repayments and interest, etc, which is 72.5 per cent of the allocation or general public services, almost 51 per cent of the current budget allocations and 42.5 per cent of the entire budgetary outlay for 2015-2016, while the envisaged expenditures on much talked about subsidies in different heads is only Rs137.6 billion or less than four per cent of the current expenditures and a little more than three per cent of the entire budgetary outlay for 2015-2016 and these allocations are Rs105.6 billion less than the amount spent on subsidies in the revised budget estimates of 2014-2015.
PSDP and FPSDP
PSDP is Rs1,513.7 billion – Rs700 billion (46.2 per cent) are envisaged for the Federal PSDP and Rs813.7 billion (53.8 per cent) for the Provincial PSDP.
Out of the FPSDP, Rs252.6 billion (36.1 per cent) would be spent by different ministries and departments of the federal government, almost Rs272 billion (38.9 per cent) for corporations and another Rs175.4 billion (25 per cent) for other development schemes of the federal government in 2015-2016.
It should be noted that the more important ministries and divisions which have been allocated insignificant amount of funds from the Federal PSDP are – Climate Change Division (Rs0.04 billion); and Economic Affairs Division (Nil) among others whereas Railways will get Rs41 billion (16.2 per cent of the allocations of ministries and 5.8 per cent of FPSDP), Pakistan Atomic Energy Commission – Rs. 30.4 billion (12 per cent of the allocations of ministries and 4.3 per cent of FPSDP), Water and Power Division — Rs. 30 billion (11.9 per cent of the allocations of ministries and 4.2 per cent of FPSDP); Kashmir Affairs and Gilgit-Baltistan Rs23.2 billion (9.2 per cent of the allocations of ministries and 3.3 per cent of FPSDP), Higher Education Commission — Rs20.5 billion (8.1 per cent of the allocations of ministries and three per cent of FPSDP), National Health Services – Rs20 billion (eight per cent of the allocations of ministries and 2.8 per cent of FPSDP); States and Frontier Regions – Rs19.7 billion (7.8 per cent of the allocations of ministries and 2.8 per cent of FPSDP); Planning, Development and Reform Division – Rs14 billion (5.5 per cent of the allocations of ministries and two per cent of FPSDP) and Ports and Shipping Division – Rs12 billion (4.8 per cent of the allocations of ministries and 1.7 per cent of FPSDP). The remaining Rs41.5 billion from the Rs252.6 billion of FPSDP (16.4 per cent of the allocations of ministries and almost six per cent of FPSDP) would be spent on the development of all other ministries and divisions of the federal government. Interestingly, the amount is Rs0.5 billion more than the allocations for the Railway of Pakistan for 2015-2016.
In conclusion
The national parliament will with certain interventions and changes adopt the Finance Bill 2015-2016 for certain, because failure to pass the bill by the House automatically becomes a vote of no-confidence for the government and according to the constitution the government would have to step down. But as always in the past these are projections of revenues and expenditures, of current and development plans of the government. As always it is the end of next financial year which would see the real figures, of where the government has over spent its allocations and where the government has failed to spent the public fund, but the people’s representatives would be so busy debating the new budget that they would not be asking the government why much needed funds have lapsed or misused. Why development is always accorded the least priority and why money needed for the uplift of the people has to be more difficult to come by than money needed for the salaries and perks of those that have usually failed in their task of providing service delivery of social protection, law and order, education, heath, safe drinking water, justice and even electricity to the tax payers and the general public at large.
