Democratizing the budget

The ruling coalition government in the country has submitted Budget FY25 to the national parliament. Pakistan’s budget-making and approval process, in its essence, is undemocratic and at times devoid of constitutional cover when it comes to billions of rupees in unauthorized expenditure. A finance bill is a law that needs to be implemented in letter and spirit, and successive Pakistani governments in the past have violated it by virtue of spending more than authorized in the budget.

Pakistan’s provinces are not equal in terms of population, geography and economy. Smaller provinces such as Sindh, Balochistan and Khyber Pakhtunkhwa (KP) feel powerless in the National Assembly where they are outnumbered by Punjab. This inherent inequality in representation can only be addressed by empowering the representative body of the federation, the Senate.

There are four key areas of reform in Pakistan’s budgetary law and the processes: one, empower the Senate with the right to vote on the financial bill; two, open debate on parts of the budget that are kept secret; three, members of parliament should have as much time as they need to debate the finance bill; and four, end the practice of supplementary budgets

Apart from these inherent issues with the budgetary process, there is an external element of financial lending institutions such as the International Monetary Fund (IMF) and the Asian Development Bank (ADB) that provide conditional loans assessing the health of the economy. The conditionalities attached with the loans lay down the framework for budget-making and limit the country’s ability to make a judgement on resource allocation and policy priorities.

The budget-making process in developing countries like Pakistan is different than the one in the United States, and other developed countries which do not rely on financial loans from the IMF and other lending institutions.

Unlike the US, where the Treasury Department’s role in budget-making is zero, in Pakistan it is the responsibility of the Ministry of Finance to prepare a budget under the guidelines given by the National Economic Committee and the federal cabinet. The budget is to be approved first by the cabinet before it goes to parliament for the vote. The budget thus reflects the vision and priorities of the executive branch of the government.

The proposed reform should start with a constitutional amendment. Pakistan’s constitution does not grant the country’s upper house, the Senate of Pakistan, financial powers or the right to vote (yes or no) on the finance bill. The lower house of parliament, the National Assembly, can on its own approve the budget. This anomaly has existed since the inception of the current constitution in 1973. Despite repeated calls from the smaller provinces, the Senate continues to be denied the right to vote on finance bills.

The secrecy around some parts of the budget needs a rethink. For Pakistan’s budget to be transparent and open, it is important that the decades-long practice of a one-line explanation of one part of the budget must end.

Pakistan has a set schedule for the presentation and approval of the budget. Every year the budget is presented in the month of June and is passed within two weeks of its submission. The country’s fiscal year begins in July. The members of the National Assembly do not get much time to review, debate and question the budgetary proposals.

The existing constitutional bar is negation of the spirit of democracy, and the practice has reduced parliament to a rubber stamp.

Finally, the practice of the supplementary budget at the year’s end, which provides legal cover to unauthorized expenditure, should be eliminated. It is irresponsible for various departments to spend above and beyond the allocated budget.

Pakistan’s budgetary process and laws governing its course need a major overhaul to remove the anomalies and uncontrolled and unauthorized expenditures, which are pushing the country to default on its foreign liabilities and the economy into recession. The reforms identified aim at streamlining the budgetary process, empowering the Senate, and allowing the smaller provinces to have a sense of participation in the country’s budget-making process.

The writer is a master’s student in public policy at the George Mason

University, Virginia, USA. He can be reached at: mrajpar@gmu.edu