Saturday July 02, 2022

Budget challenges galore

May 20, 2022

LAHORE: Every year the trade associations send their budget ‘proposals’ to the federal government with a hope that some would be accepted, similarly each government department sends its ‘demands’ for the next budget that are invariably accepted.

Both the businessmen and the bureaucracy are aware of the scarce or in fact short resources the federal government has at its disposal. Bureaucrats simply ask for 10-15 percent additional allocations from what they spent in the previous year.

Under the existing customs, all departments are supposed to consume their allocated resources within the fiscal year. If they make some savings, then the budget allocation for the next year is reduced equivalent to the savings.

This is the reason that all government departments and ministries make all out efforts to consume the entire budget even by going for unnecessary purchases. Some even overspend the budgeted amount, and the government asks for supplementary grants before the next budget to cover the over spent expenditures.

There is no discipline in the way the budget is consumed by the bureaucracy. Those that save should be rewarded and not punished.

Power bills are part of budget allocations, but many important departments over use the power allocation and default on payments. This is the reason that power receivables against the government departments and the ministries continue to increase every year.

There is overspending on telephone bills and petrol as well. Unnecessary traveling also results in wasteful expenses.

At the time of budget presentation, sometimes the governments announce a flat cut of 10-20 percent in the budget of all government departments. This is done without proper homework. The cut cannot be applied on the salaries or on research projects.

These cuts must be specific and monitored on a monthly basis to ensure that cuts are made, and the government is not forced to ask for a supplementary budget. The cuts if not strictly monitored are farce. Even the cuts announced in prime ministers’ budget are farce as the additional expenses are covered from other sources.

As far as the private sector is concerned the businessmen are confused. Governments ask them to submit the proposals four months before the presentation of the budget.

Businessmen delay their proposals till April or May. By that time the budget document is almost finalised. Budget documents contain thousands of pages that must be scrutinised before sending them for printing. Any last-minute changes are difficult to incorporate so late.

Most of the proposals submitted late are not even seen by the authorities. Some trade associations send their budget proposals on time, but also send more proposals late taking the chance that these proposals might be considered.

The chambers of commerce and industries send proposals from members belonging to industries and members that represent traders.

These proposals are conflicting in nature. Industries desire higher duties on imports to protect their products. Traders desire waiver on duties or no duties at all.

Then there are sectors where the sub-sectors have conflict of interest. Basic textile for instance wants high import duties on import of yarn and fabric (this covers even those yarns and fabrics that are not produced by them). Knitwear and readymade garment exporters want duty free import of these items that are in fact their basic raw materials.

We lag in value-added exports because of lopsided policies in these sectors. The basic textile players are highly influential and almost get their proposals accepted.

Traders make sure that their transactions are not properly taxed, agriculturists do not want to pay income tax on the same bases that others do. The capital market ensures that it operates the way in which its top players earn huge wealth without paying actual taxes.

All this makes the budget a headache for politicians. They do not want to annoy vested interests.