Pakistan meets only 44.8pc budgetary needs through official revenues

Comment

By Mansoor Ahmad

LAHORE: Bangladesh meets 64.1 percent of its budgetary needs from tax revenues, and India’s revenues are enough to meet 60.6 percent of its budget expenditure, but in Pakistan only 44.8 percent budgetary needs are met through official revenues.

Bangladesh generates 7.8 percent of non-tax revenues for budgetary support; India generates 10.0 percent, and Pakistan 7.5 percent non-tax revenues to support their budget expenses. Borrowing/loans to cover the budget deficit is equivalent to 27.7 percent of the total budget outlay in Bangladesh; it is 25.6 percent in India, and a whopping 41.3 percent in Pakistan. Foreign grants and capital receipts are equivalent to 1.4 percent of total budget size in Bangladesh, 3.8 percent in India, and 6.4 percent in Pakistan.

India with a population of over 1.27 billion has the highest budget outlay of $360 billion. Pakistan’s total budget outlay is $49 billion and its population is 210 million which is six times less than India. But Indian budget is seven times higher than Pakistan. Budget out lay of Bangladesh is $55 billion and its population is 180 million.

Gross revenue receipts of Pakistan for 2018-19 are Rs5,661 billion (both tax and non tax revenue). Indian total revenue receipts for 2017/18 (India’s fiscal year starts from March) were Rs2,146,735 crore. The size of the Bangladesh budget for 2017/18 was Taka 4,002.66 billion. The latest annual budgets of the three countries have been converted into US dollar to make it easier to compare.

The dollar is currently valued Takka 84, Indian Rupee 68 and Pakistani Rupee 122. This research has been conducted to apprise the new government about the way the resources are allocated in our neighbouring countries that are benefitting their populations immensely.

We are poor in human development as well as in infrastructure development because we give preference to other expenses that can be avoided. The manner in which the government revenues are spent in the three main countries of sub-continent -India, Pakistan and Bangladesh- highlights the reason for the huge development gap Pakistan has with its neighbours.

It may be noted that all the three countries are short of resources and have to borrow from outside to balance their budgets.

But the resources collected by the Pakistani government are far too short than its other two neighbours.

On spending on per capita basis, Bangladesh tops with $340 per capita. India is second with spending of $258 per capita, and Pakistan is last with budget allocation of $238 per capita.

Even this in fact is not the true picture. The budget allocations for different heads reveal a more depressing story.

Bangladesh spends 54 percent of its budget on development. This means that it generates 50 percent (27 percent) resources for development from government revenue and 27 percent from borrowing. That means that almost every penny that it borrows is spent on development.

India spends 39 percent of its budget on development. This means that it finances 13.4 percent on development from own resources and the entire borrowing is spent on development.

Pakistan spends only 19 percent of its budget on development programmes. That means the country totally depends on borrowing to finance its development.

Not only that, it has to borrow 23.3 percent of its budget needs for non-development expenditures (as stated earlier, it borrows 41.3 percent to balance its budget).

It is worth noting where the non-development expenses go in these countries. Defence consumes 6 percent of Bangladesh budget; India on the other hand spends 12 percent of its budget on defence.

The defence expenditure in Pakistan consumes 21 percent of its budget.

Interest payments account for 10 percent of the total budgetary outlay in Bangladesh. India consumes 24 percent of its budget to service its loans, and Pakistan has to reserve 31 percent of its budget for debt servicing.

The new government would have to reduce non-development expenditure prudently and drastically besides increasing revenues at least by 30 percent to remove deficiencies in our economy.

Reducing corruption will be an icing on the cake as it would increase development outcomes corresponding to reduction in corruption and reduce the non-development expenditure as well.