Tag Archive: Budget

Critics of Pakistan budget have unleashed their criticism on the government’s economic plan without realizing that this budget has some admirable elements such as:

  • The proposed GST reform that will levy a 15% flat tax will not apply on health, education and food items consumed by the poor,
  • The exemption limit for salaried taxpayers is to be enhanced from Rs200,000 to Rs300,000 benefiting approximately 430,000 taxpayers,
  • Additional tax relief of about two billion rupees have been provided to benefit 300,000 taxpayers of Khyber Pakhtunkhwa, FATA & PATA,
  • Federal government employees will be allowed an ad hoc monthly allowance equal to 50% of one month’s basic pay. This benefit would not be available to such federal government employees who are already in receipt of a monthly allowance equal to one month’s basic pay,
  • This budget has been prepared by the technocrats and not the politicians. It has been made as per the text-book (read: IMF diktats).

But fact of the matter is that this budget is not pro-poor by any standard because the revenues rely on indirect taxes which are to be paid by everyone irrespective of their capacity to pay. This has triggered and will trigger more inflation and will make the life of common man really difficult. A pro-poor budget should have a minimum of 65% of revenue from direct taxes like income tax which is paid by wealthy people. Sadly, this budget collects 65% of revenue from indirect taxes i.e. from poor segment of the society and can be called a budget for “poor” privileged class. In this country, a person who can not make both ends meet pays as much tax as a person having palaces and limos. This is gross injustice and breeds hatred, frustration and unrest. This will spell disaster  for the society in the days to come.

Bye bye to day-to-day interference of Ministry of Finance in the micro-management of line ministries. From Budget 2010-11, Government of Pakistan has introduced Medium Term Budgetary Framework. MTBF has a strategic element to budget-making and is a step-forward to modernize the existing incremental budgeting system. It may, however, take several years for full implementation. Its objectives include:

  • Making the budget a flexible and responsive mechanism for carrying forward the policies, strategies and priorities,
  • Introducing a progressive process of the empowerment of line ministries to manage their own budgetary cycles in an overall context which provides the maximum achievable level of predictability of resource flows,
  • Shifting the role of the central agencies like Ministry of Finance and the Planning Commission in budget management from micromanagement of transactions to strategic management of the application of resources to achieve results.

This new budgetary approach helps planners and managers think through the logic of their intervention and how they relate to the ministry’s overall objectives. It requires that the ministry specify how its activities, outputs and outcomes are linked. This logic can then be tested by asking a series of “if-then” questions like:

If inputs (resources) are provided then activities can be undertaken. If activities are undertaken then outputs will be produced. If outputs are produced then outcomes will be achieved. If outcomes are achieved then the organization will have made progress towards achieving its overall goals.

The Goal means the overall objectives to which the ministry is aspiring. Summary of the goals is also called Vision Statement. Output is delivery of service or product and Activities are special tasks undertaken to achieve the required output. Inputs are resources required to undertake activities and Outcome is the result (or impact) of output on the target population.

Let us hope that MTBF will prove to be a welcome innovation.