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May 24, 2017



Can we afford a useless exercise?

The exercise of presenting annual statistics related to probable expenditures and income of a nation started in 18th century Britain. Derived from the French word ‘bougette’ (meaning purse), it started as a PR stunt to placate the worries of a nation and its business community that felt uneasy about the finances of the exchequer.

In 1764, Lord Grenville presented the first budget – a statement of the income and expenditures – assuring the nation that the numbers ought to ameliorate the worries as the exchequer was in a fine fiscal position. Thus began a tradition that has continued unabated for centuries. It made its first appearance in our parts in 1869 when James Wilson, a member of the viceroy’s finance committee, presented the Subcontinent’s first annual budget.

To get an idea of the price that we have to pay for this futility, let’s start with the bureaucracy (and the whole government machinery in general). Go to any government office these days, and you’d be hard pressed to find employees who can give you some time to listen to your complaint. Ask them what is consuming their time and their reply will be, “These are budget days”, which means that they have little time for anything else. It is a pity that all this running around makes for little productive work and the pressing problems of the hoi polloi are pushed to the back burner.

This process begins every October and becomes intense in the last two or three months before the budget is foisted upon us. All this running around is unproductive because most suggestions and demands either never see the light of day or are simply left unattended because there is little fiscal space left to consider them. Indirectly, it amounts to wastage of hours and print paper for no benefit.

Moreover, within the government machinery, budget preparations foster an environment of negative creativity. How so? A few years ago, I got the chance to sit with a secretary while working for him as a consultant. In a relaxed mood, he pointed towards a huge pile of files, informing me that all these were budget proposals that were rejected. They constituted almost 75 percent of the total proposals received for the budget from various departments. The secretary sadly remarked about the tendency in government circles to come up with unproductive proposals in the garb of ‘projects’ (since the remuneration for projects is double the basic pay for civil servants). It happens every year, he said, and a lot of money and time are wasted on coming up with unrealistic projects and figures.

Other unproductive behaviour in the garb of budgets is worth mentioning too. There is a government rule that bounds government departments to ‘surrender’ unspent amounts of money. In case the reader is unaware, departments (both at federal and provincial levels) are so poor at managing and spending money productively that they hardly spend half of their allotted annual budgets (yet, paradoxically, they always come up with a demand for more in the next year). And of their total expenditures, most is in the form of current expenditures (salaries etc) rather than development related expenses.

If anyone can get their hands on disaggregated expenditure figures by every month, they’d find an interesting trend: a major chunk of expenditure takes place in the last three or four months. It’s not as if government departments suddenly become productive in the last months before the budget, they just don’t like to return the unspent money to the national kitty. This accelerated pace of expenditures in itself spawns a whole industry of rent-seeking, lobbying and corruption. These tend to become larger in magnitude each year, mirroring government expenditures that also tend to increase over time. All of this would also explain, for example, why cheques are issued on the very last day before the presentation of a budget.

These kinds of unproductive behaviours are not limited to the government and bureaucracy; they have permeated the actions of consumers, producers and sellers. For hoarders, the budget is a godsend that helps them hoard commodities and sell at black market prices. For consumers, who by now have become smart enough, it is a time to stock up on goods, in the process outbidding other consumers. For sellers, it’s time to make some quick money off of consumers. Ask them, and the cited reason is the budget. Inflation trajectory suddenly takes a turn towards the sky. All of this is at the misery and expense of the people.

Additionally, think about all the expenses involved in preparing those huge, hefty volumes that contain budgetary figures (called the pink book). Almost nobody reads them and the numbers mentioned in them are not real, but expected. One can find them rotting in government offices, the National Assembly or the Senate. This whole exercise makes little sense if one considers the fact that all the numbers, especially about projected income, rarely stay true to projections. Otherwise, there would have been little need for taking recourse to frequent stop-gap measures. It is not too difficult a task to put up numbers of expenditures and income from time to time, is it? In fact, on the finance division’s website, one can find a statement of fiscal operations. What then, prey, is the need for going through this whole exercise every year?

To sum up, the exercise of preparing, printing and presenting budgets constitutes a travesty, a waste of time, gives further vent to corruption, rent-seeking and unproductive behaviour, and ends up costing the nation significantly (both in monetary and non-monetary terms). I cannot say about the rest of the world, but in Pakistan, this no-good exercise needs to be done away with.


The writer is a freelance contributor.

Email: [email protected]

Twitter: @ShahidMohmand79