Main Contours of Federal Budget 2011-2012

A Brief for Parliamentarians

Published by
Pakistan Institute of Legislative Development and Transparency - PILDAT
Head Office: No. 7, 9th Avenue, F-8/1, Islamabad, Pakistan
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Copyright Pakistan Institute of Legislative Development And Transparency - PILDAT
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Printed in Pakistan
Published: June 2011
ISBN: 978-969-558-210-1
Any part of this publication can be used or cited with a clear reference to PILDAT.
CONTENTS CONTENTS
Preface
Budget Presentation
Powers of the Executive in Budget Execution in Pakistan
Main Contours of Budget 2011-2012
Impact of the 18th Amendment on the Federal Budget 2011-2012
Ministry-wise Budget Allocations
Most Notable change in Government's Expenditure Policy
Selected Sectoral Allocations in the Budget 2011-2012
Tables
Table 1: Medium-Term Budgetary Statement 2011-2014 (percentage of GDP)
Table 2: Medium-Term Budgetary Statement 2011-2014 (in numbers)
Table 3: Details of Borrowing
Table 4: Budget at a Glance
Table 5: Ministry-wise Budget Allocations
Table 6: Allocations for Subsidies
Table 7: Sectoral Allocations in Federal Budget 2011-2012
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P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
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he national budget, representing the government's fiscal, financial and economic objectives, serves as the most important
policy document of a country. Through the appropriation of the budget, the Parliament empowers the executive to raise the T
revenues and other funds required to finance the delivery of public services. Parliamentary control and scrutiny of the budget,
therefore, is one of Parliament's most important powers. Parliament is the appropriate place to ensure that the budget best
matches the nation's needs with available resources. Such an exercise demands detailed engagement of the Parliament and
Parliamentary Standing Committees, the real engines behind Parliamentary work and efficiency, with the budget for its analysis
and scrutiny.
Federal Budget 2011-2012 was presented to the Parliament on June 3, 2011. This paper, prepared especially for the benefit of
the Parliamentarians looks at main contours of the Budget 2011-2012 and will serve as a backgrounder to PILDAT Briefing for
Parliamentarians on How to effectively participate in Parliamentary Budget Debate? scheduled at the start of the budget
debate so as to equip MPs to make an effective and useful contribution while reviewing the budget before its passage.
The paper is authored by Mr. Nohman Ishtiaq who is a public financial management specialist and is currently advising the
Federal Government and the Government of Khyber PakhtunKhuwa. He has helped the Government in implementing country-
wide reform programmes related to Financial Management. He works with AbacusConsulting, Pvt. Ltd, a premier management
consulting company in Pakistan as a Director. Professionally he is a Chartered Accountant and a Chartered Management
Accountant from the United Kingdom.
Acknowledgments
This paper has been prepared by PILDAT with support from the UKs Department For International Development, DFID.
Disclaimer
The opinions, findings and conclusions or recommendations expressed in this paper are those of the author and do not
necessarily reflect the views of PILDAT, or DFID.
Islamabad
June 2011
PREFACE
P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
Budget Presentation
Budget 2011-2012 was presented in the Cabinet and
Parliament on Friday, June 3, 2011 by the Federal
Government. The presentation of the budget is as per
Article 80 of the Constitution, which states:
The Federal Government shall, in respect of
every financial year, cause to be laid before the
National Assembly a statement of the estimated
receipt and expenditure of the Federal
Government for that year, in this Part, referred to
as the Annual Budget Statement.
As per the Constitution two 'Bills' are presented in the
National Assembly at the time of presentation of the
budget:
1. The Money Bill, and
2. The Finance Bill
Article 73 of the Constitution presents the requirements
and processes of both the Bills. Article 73 states:
, a Money Bill shall originate in the National
Assembly: Provided that simultaneously when a
Money Bill, including the Finance Bill containing
the Annual Budget Statement, is presented in the
National Assembly, a copy thereof shall be
transmitted to the Senate which may, within
seven days, make recommendations thereon to
the National Assembly. The National Assembly
shall consider the recommendations of the
Senate and after the Bill has been passed by the
Assembly with or without incorporating the
recommendations of the Senate, it shall be
presented to the President for assent.
In upcoming days, the budget will be debated in the
Parliament and subsequently through the process of voting,
will be approved and/or disapproved. There will be general
debate on the budget in which Parliamentarians can
participate. On finalization of general debate on the budget,
the Finance Minister will wind up the budget debate by
presenting answers to the questions raised in the general
debate. Parliamentarians who intend to alter the budget will
be given a chance to present cut-motions (cut-motions are
written recommendations on the budget). Finally, through
the process of voting on expenditure demands (other than
charged demands that are Constitutionally provided) the
budget will be passed. Subsequently, the Prime Minister
will authenticate the Schedule of Authorised Expenditure as
per Article 83 of the constitution, which states:
The Prime Minister shall authenticate by his
signature a schedule
a) the grants made or deemed to have been
made by the National Assembly under
Article 82, and
b) the several sums required to meet the
expenditure charged upon the Federal
Consolidated Fund but not exceeding, in
the case of any sum, the sum shown in
the statement previously laid before the
National Assembly.
(2) The schedule so authenticated shall be
laid before the National Assembly, but
shall not be open to discussion or vote
thereon.
(3) Subj ect to the Consti tuti on, no
ex pendi t ur e f r om t he Feder al
Consolidated Fund shall be deemed to be
duly authorised unless it is specified in
the schedule so authenticated and such
schedule is laid before the National
Assembly as required by clause (2).
Powers of the Executive in Budget Execution in
Pakistan
As per Article 84 of the Constitution, post-budget approval,
the executive has powers to spend beyond the originally
approved budget. Article 84, states:
the Federal Government shall have power to
authorize expenditure from the Federal
Consolidated Fund, whether the expenditure is
charged by the Constitution upon that Fund or
not, and shall cause to be laid before the National
Assembly Supplementary Budget Statement or,
as the case may be, an Excess Budget
Statement, setting out the amount of that
expenditure, and the provisions of Articles 80 to
83 shall apply to those statements as they apply
to the Annual Budget Statement.
There are perhaps no more than 2-3 countries in the world
including Pakistan where there is no ex-ante (before the
expenditure) approval of the Parliament of supplementary
budget. Article 84 of the constitution therefore, needs a
review.
05
Bu Bu Budg dg dget et et PPPre rese sent nt ntat at atio io ionn
wi wi will ll ll aaut ut uthe he hent nt ntic ic icat at ate e th th the e Sc Sc Sche he hedu du dule le le oof f f Au Au Auth th thor oris is ised ed ed EEExp xpen endi di ditu tu ture re aas s
P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
Main Contours of Budget 2011-2012
The Budget 2011-12, as stated above, was presented in the Parliament on June 3, 2011. The Finance Minister in his speech
provided the main contours of the budget. In his speech, the Finance Minister also spoke about the key economic policies of the
Government and how they affect lives of people in the country. The Finance Minster also spoke about the reforms process
through which the Government intends to manage the economy. The Budget 2011-2012 has been prepared as per medium-
term fiscal framework of the Government. The medium-term fiscal framework is a requirement of the Fiscal Responsibility and
Debt Limitations Act of 2005 (FRDLA).
The medium-term fiscal framework has been presented in the Parliament as part of a book called Medium-Term Budgetary
Statement 2011-2014 in accordance with the FRDLA. The statement presented the overall revenue, expenditure and deficit
targets for the three-years as given in Table 1.
As per the medium term budgetary statement, the Government will borrow as much as 4 per cent in 2011-2012 to finance its
budget deficit (difference between revenue and expenditure).The public debt of the Government will be brought down from 57
per cent to 46 per cent over the next three years. The medium term budgetary statement is presented in percentage of the GDP.
When converted in numbers, the key numbers are given in Table 2 (figures have been rounded).
07
Provisional
Estimates
Budget
Estimates
Target for
Medium-Term Budgetary Statement 2010-11 2011-12 2012-13 2013-14
Real GDP Growth (%) 2.4 4.2 4.5 4.7
Inflation (%) 15.5 12.0 9.5 8.0
(As percentage of GDP)
Revenue 13.0 13.6 13.4 13.2
Expenditure 18.7 17.7 16.9 16.2
Deficit -5.7 -4.0 -3.5 -2.9
Total Public Debt 57.2 53.2 48.6 45.8
GDP (mp) Rs. Billions 18,063 21,041 24,200 27,464
Table1: Medium-Term Budgetary Statement 2011-2014 (percentage of GDP)
Source: Medium-Term Budgetary Statement, budget 2011-12, Ministry of Finance website.
Original
Budget
Provisional
Estimates
Budget
Estimates
% Change % Change
(Rupees in
Billions)
2010-11 2010-11 2011-12
Original Vs.
Provisional
Budget Vs.
Provisional
Revenue 2,575 2,350 2,870 -9.6% 18.1%
Expenditure 3,260 3,380 3,720 3.6% 9.1%
Deficit -685 -1,030 -850 33.5% -21.2%
Total Public Debt 9,868 10,330 11,200 4.5% 7.8%
Table 2: Medium-Term Budgetary Statement 2011-2014 (in numbers)
Source: Budget in Brief 2011-12, Ministry of Finance, website
Ma Ma Main in in CCConto to tours of of of BBBud ud udget t t 20 20 2011 11 11-2 -2 -201 01 01222
P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
08
The information in table 1 and 2 pertains to the country as a whole (i.e., Federal Government and Provincial Governments). For
the Federal Government, the budget deficit is Rs. 975 (Rs. 850 plus Rs. 125 surplus expected from provinces Source: Budget
in Brief 2011-12, Ministry of Finance, website).
In order to finance its budget deficit for the 2011-2012, the Government will borrow from the domestic and external sources.
The borrowing details are given in Table 3. For the Federal Government, the details presented in the budget in brief are given in
Table 4.
Table 3: Details of Borrowing
Source: Budget in Brief 2011-12, Ministry of Finance, website
Source of Financing Rs. In Billions
Grants 127
Net Foreign Loans 8
Domestic Loans 716
Table 4: Budget at a Glance
Source: Budget in Brief 2011-12, Ministry of Finance, website
TTTab ab able le le 333: : : De De Deta ta tail il ils s s of of of BBBor or orro ro rowi wi wing ng ng TTTTTT
P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
Rs. In Billion
(a) Tax Revenue* 2,074 A. CURRENT 2,315
(b) Non-Tax Revenue 658 Interest Payment 791
- Gross Revenue Receipts 2,732 Pension 96
- Less Provincial Share 1,203 Repayment of Foreign Loans 243
I. Net Revenue Receipts (a-b) 1,529 Defence Affairs & Services 495
II. Net Capital Receipts 396 Grants and Transfers 295
III. External Receipts 414 Subsidies 166
IV. Estimated Provincial Surplus 125 Running of Civil Government 203
V. Bank Borrowing 304 Provision for Pay & Pension 25
B. DEVELOPMENT 452
PSDP 355
- Federal Government 300
Developmetn Loans & Grants to Provinces 55
Other Development Expenditure 97
TOTAL RESOURCES (I to V) 2,767 TOTAL EXPENDITURE (A+B) 2,767
*Out of which FBR collection has been estimated at Rs.1,952 billion.
RECEIPTS EXPENDITURE
09
Table 4 shows that the Net Revenue Receipts of the Federal Government are proposed at Rs.1,529 billion. Out of this Interest
Payment of Rs.791 billion, Defence Rs. 495 billion, Pensions Rs. 96 billion and around 125 billion of pay & allowances of civil
government (50% of running of civil government plus Rs.25 billion provision) occupies 98.5% of the budget. While the interest
is obligatory Constitutional payment, defence, pensions and pay & allowances of civil government are normally considered
mandatory. There is therefore, very little room for the Federal Government to invest in public service delivery, capital
investments and provide for subsidies, grants and social security programmes. Thus the Federal Government borrows to
finance these services.
Impact of the 18th Amendment on the Federal Budget 2011-2012
The 18th Amendment to the Constitution omitted the concurrent list. Based on this omission about 17 ministries were identified
that will be devolved to the provinces by June 30, 2011. As of today, a total of 10 Federal Ministries have been devolved.
Remaining 7 Ministries are to be devolved by June 30, 2011. The 10 Federal Ministries that have been devolved to the provinces
no longer find a room in the Federal Budget. However, their remaining functions and employees have been allocated to the
existing Ministries. Key changes are noted below:
1. A new division has been created by the name of Capital Administration and Development Division (CADD) to which all the
remaining federal functions have been transferred. For example, the federal educational institutes are now part of the
CADD.
2. The health vertical programmes (the national health programmes are called vertical programmes that provide services in
provinces and districts, e.g. Immunization programme), as per the decision of the Council of Common Interests will be
part of the Federal Budget. Hence the budget for vertical programmes has been shown in Planning and Development
Division.
3. The People Works Programme has been transferred to the Cabinet Secretariat.
4. A provision has been created in the Federal Budget for the remaining 7 Ministries that will be devolved to the provinces.
Budget for these 7 Ministries has not been provided separately.
Ministry-wise Budget Allocations
Ministry wise allocations for the budget 2011-2012 as compared to the original budget 2010-2011 are as given in Table 5.
Table 5: Ministry-wise Budget Allocations
Ministry Executive Authority Budget 2010-11 Budget 2011-12
%
Change
Cabinet Seretariat Cabinet Division 9,879,315 45,191,571 357%
Prime Minister's Secretariat 484,831 546,579 13%
Prime Minister's Inspection
Commission 34,688 49,925 44%
National Accountability Bureau 700,000 629,974 -10%
Pakistan Atomic Energy
Commission 19,151,902 26,206,773 37%
President's Secretariat 427,254 482,636 13%
Board of Investment 176,310 156,574 -11%
Earthquake Reconstruction and
Rehabilitation Authority 10,000,000 10,000,000 0%
Benazir Income Support
Programme 50,000,000 50,000,000 0%
Pakistan Nuclear Regulatory
Authority Establishment Division 452,460 575,455 27%
Establishment Division 2,334,864 3,647,116 56%
Capital Administration and
Development Division 4,447,954
TTTab ab able le le 444 sssho ho hows ws ws tttha ha hat t t th th the e e Ne Ne Net t t RRR TTTTT ev ev even en enue ue ue RRRec ec ecei ei eipt pt pts s s of of of ttthe he he FFFed ed eder er eral al al GGGov ov over er ernm nm nmen en ent t t ar ar are e e pr pr prop op opos os osed ed ed aaat t t Rs Rs Rs.1 .1 .1,5 ,5 ,529 29 29 bbbil il illi li lion on on. Ou Ou Out t t of of of ttthi hi his s s In In Inte te tere re rest st st
P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
All Figures in Thousands
10
Commerce Commerce Division 5,393,164 5,287,767 -2%
Communication Communication Division 5,374,599 5,730,732 7%
Defence Defence Division 452,288,090 505,699,263 12%
Defence Production Defence Production Division 1,760,645 1,986,146 13%
Economic Affairs and Statistics Economic Affairs Division 323,160,390 428,768,312 33%
Statistics Division 931,349 1,286,594 38%
Finance, Revenue and Planning
and Development Finance Division 5,479,931,877 7,646,960,662 40%
Controller General of Accounts 2,165,893 2,837,997 31%
Office of the Auditor General of
Pakistan 1,832,418 2,303,890 26%
Higher Education Commission 38,982,000 40,887,321 5%
Revenue Division 12,442,079 14,105,221 13%
Planning and Development
Division 9,931,890 32,728,439 230%
Foreign Affairs Foreign Affairs Division 11,527,067 12,383,558 7%
Housing and Works Housing and Works Division 6,245,195 4,450,438 -29%
Human Rights Human Rights Division 101,087 110,793 10%
Industries and Production Industries and Production Division 3,787,349 2,778,439 -27%
Information and Broadcasting
Information and Broadcasting
Division 3,547,964 4,251,780 20%
Information Technology
Information Technology and
Telecommunications Division 3,097,889 3,332,139 8%
Inter Provincial Coordination
Inter Provincial Coordination
Division 25,836 335,825 1200%
Interior Interior Division 50,005,532 55,697,058 11%
Kashmir Affairs and Gilgit
Baltistan
Kashmir Affairs and Gilgit
Baltistan Division 25,215,134 33,475,251 33%
Law and Justice and
Parliamentary Affairs
Law, Justice and Parliamentary
Affairs Division 2,755,632 3,184,055 16%
Supreme Court of Pakistan 823,400 986,557 20%
Election Commission of Pakistan 1,253,958 1,389,753 11%
Islamabad High Court 116,110 212,195 83%
Federal Shariat Court 143,872 268,634 87%
Narcotics Control Narcotics Control Division 1,573,339 1,736,314 10%
National Assembly and the
Senate National Assembly 1,593,856 1,803,092 13%
Senate 907,610 1,041,101 15%
Overseas Pakistanis Overseas Pakistanis Division 472,433 491,074 4%
Petroleum and Natural
Resources
Petroleum and Natural Resources
Division 1,145,320 703,172 -39%
Ports and Shipping Ports and Shipping Division 928,705 1,238,862 33%
Postal Services Postal Services Division 8,785,884 10,987,351 25%
Privatisation Privatisation Division 72,725 74,743 3%
Railways Railways Division 63,636,159 60,000,000 -6%
Religious Affairs Religious Affairs Division 400,490 457,878 14%
Council of Islamic Ideology 56,462 71,066 26%
Ministry Executive Authority Budget 2010-11 Budget 2011-12
%
Change
Table 5: Ministry-wise Budget Allocations (continued...)
MMiinniissttrryyy EExxeeccuuttiivvee AAuutthhoorriittyyy BBuuddgggeett 22001100-1111 BBuuddgggeett 22001111-1122
%%%
CCChhhaaannngggeee
TTTab ab able le le 555: : : Mi Mi Mini ni nist st strrr TTTTT y- y- y-wi wi wise se se BBBud ud udge ge get t t Al Al Allo lo loca ca cati ti tion on ons s s (c (c (c (con on onti ti tinu nu nued ed ed...) .) .) .)
P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
11
The information presented in Table 5 includes total budget by Principal Accounting Officers of the Government for each Ministry
with combined recurrent and development budgets.
Most Notable change in Government's Expenditure Policy
The most notable change in Government's expenditure policy relates to subsidies. The Government has proposed in budget
2011-2012 that the subsidies on electricity should be eliminated and the food and fertilizer subsidies should be targeted to the
poor and marginalized only. Allocations for the subsidies are given in Table 6.
Budget 2010-11 Revised 2010-11 Budget 2011-12
Total Subsidies 127 billion 396 billion 166 billion
Includes:
Electricity related subsidies 87 billion 343 billion 148 billion
Table 6: Allocations for Subsidies
Selected Sectoral Allocations in the Budget 2011-2012
Table 7 presents selected sectoral allocations in the budget 2011-2012.
Ministry Executive Authority Budget 2010-11 Budget 2011-12
%
Change
Table 5: Ministry-wise Budget Allocations (continued...)
Science and Technology Science and Technology Division 4,968,373 4,833,993 -3%
State and Frontier Regions
State and Frontier Regions
Division 2,683,635 4,857,259 81%
Federally Administered Tribal Area 16,834,599 21,618,203 28%
Textile Industry Textile Industry Division 305,746 274,603 -10%
Wafaqi Mohtasib Secretariat Wafaqi Mohtasib Secretariat 259,778 273,278 5%
Water and Power Water and Power Division 27,701,562 34,497,178 25%
Federal Tax Ombudsman
Secretariat
Federal Tax Ombudsman
Secretariat 94,781 90,103 -5%
Source: Federal Medium-Term Budget Estimates for Services Delivery 2011-14
TTTab ab able le le 555: : : Mi Mi Mini ni nist st strrr TTTTT y- y- y-wi wi wise se se BBBud ud udge ge get t t Al Al Allo lo loca ca cati ti tion on ons s s (c (c (con on onti ti tinu nu nued ed ed...) .) .)
P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
12
Table 7: Sectoral Allocations in Federal Budget 2011-2012
Sector Type Shown in budget of; Budget
2010-11
Budget
2011-12
% Change
Water & Power Water Water and Power Division 28 34 21%
Power Finance Division 12 33 175%
Atomic Energy Pakistan Atomic Energy
Commission, Cabinet
Secretariat
15 22 47%
Electricity
Subsidies
Finance Division 87 148 70%
Defence, Public
Safety and Law &
Order
Defence
Services
Ministry of Defence 442 495 12%
Military
Pensions
Ministry of Finance 72 73 1%
Public Safety Ministry of Interior 50 56 12%
Law & Order Ministry of Law,
Parliamentary Affairs and
Justice
5 6 20%
Social Protection Income
Support
Benazir Income Support
Programme, Cabinet
Secretariat
50 50 0%
Bait al Maal Cabinet Secretariat 2 2 0%
Internally
Displaced
Persons
Cabinet Secretariat 45 5 -89%
Railways Current &
Development
Railways division 63 60 -5%
Grant Finance Division 22 25 14%
Communications Current &
Development
Communications Division 5 6 20%
National
Highway
Authority
Finance Division 45 40 -11%
Special Areas FATA FATA 17 22 29%
AJK, GB AJK, GB Division 25 33 32%
ERRA Cabinet Secretariat 10 10 0%
Higher Education Higher
Education
Commission
Ministry of Finance 39 41 5%
Housing & Works Housing &
Works
Housing & Works Division 6 4 -33%
People Works
Programme
Cabinet Secretariat 30 33 10%
Rs. Billions
P I L D AT
Main Contours of Federal Budget 2011-2012
A Brief for Parliamentarians
Pakistan Institute of Legislative Development and Transparency - PILDAT
Head Office: No. 7, 9th Avenue, F-8/1, Islamabad, Pakistan
Lahore Office: 45-A, Sector XX, 2nd Floor, Phase III Commercial Area, DHA, Lahore
Tel: (+92-51) 111-123-345; Fax: (+92-51) 226-3078
E-mail: info@[Link]; Web: [Link]