Title: Understanding the Pakistan Budgeting Process: Basics and Key Insights Introduction to Budgeting: Budgeting is a fundamental aspect of fiscal management, providing a blueprint for allocating financial resources to meet the needs and goals of a nation. In the context of Pakistan, the budgeting process plays a pivotal role in shaping economic policies, social development initiatives, and infrastructure investments. Understanding the basics of budgeting in Pakistan is essential for comprehending the intricacies of its fiscal framework and the implications for various sectors of the economy. Key Components of the Budgeting Process: The budgeting process in Pakistan comprises several key components, each contributing to the formulation and execution of the national budget. These components include: Fiscal Year Definition: The fiscal year in Pakistan begins on July 1st and ends on June 30th of the following year. This timeframe serves as the basis for planning and implementing budgetary measures. Budget Preparation: The budget preparation phase involves extensive deliberations and analysis by government officials, policymakers, and relevant stakeholders. It encompasses the estimation of revenues, expenditures, and deficit targets for the upcoming fiscal year. Revenue Mobilization: Revenue mobilization is a critical aspect of budgeting, as it determines the government's ability to finance its expenditure programs. In Pakistan, revenue sources include taxes, tariffs, grants, and other forms of income generated by the state. Expenditure Allocation: Allocating expenditures across various sectors such as education, healthcare, defense, and infrastructure is a crucial aspect of the budgeting process. Government priorities, economic challenges, and social needs influence the distribution of funds to different areas. Budget Approval: Once the budget proposal is formulated, it undergoes scrutiny and approval by the Parliament. Parliamentary debates, discussions, and revisions may occur before the budget receives final approval. Budget Implementation: Implementation of the budget involves executing the planned expenditures and revenue measures outlined in the budget document. Government agencies and departments are responsible for ensuring that allocated funds are utilized efficiently and effectively. Budget Monitoring and Evaluation: Monitoring and evaluation mechanisms are put in place to assess the performance and outcomes of budgetary allocations. This includes tracking expenditures, evaluating program effectiveness, and addressing any deviations from the budget plan. Understanding Budgetary Terms and Concepts: To comprehend the Pakistan budgeting process fully, it's essential to familiarize oneself with various terms and concepts commonly used in fiscal discussions. Some of these terms include: Fiscal Deficit: The fiscal deficit represents the shortfall between government expenditures and revenues in a given fiscal year.

2. 2

3. 3

4. AIM
To apprise the house about basics of
budgeting and the budgeting process in
Pakistan.
4

5. SEQUENCE
5
Introduction
Definition
Brief History
Functions
Preliminaries
Types of Budget
Case Study
Conclusion
Q&A Session

6. DEFINITION
 Quantitative economic
plan in respect of a period
of time
 Numerical expression of
planned revenues and
expenses for a specified
period of time
 Transform objectives &
plans into realities.
6

7. HISTORICAL BACKGROUND
7
 Trace back to British
Monarchy in the 1700s
 Modern budgeting
disciplines emerged in the
1950s
 Defined a standard fiscal
year, and created
accountability reporting

8. FUNCTIONS OF BUDGET
8
Planning
Co-ordination
Evaluation
Controlling
Measurement
Communicating

9. 9
 Goals , Objectives and
strategies be defined
 Road to be travelled in
fulfillment of organizational
objective
 Plan for future operations,
refine existing strategic plans
Planning
FUNCTIONS OF BUDGET

10. 10
 Consolidate the actions of
the different entities
 Examine relationship
among different parts of
an organization
Co-ordination
FUNCTIONS OF BUDGET
State
Controller
State
treasurer
Revenue
Department
Business
elite
State
Auditor

11. 11
 Effective management
tool
 Important mechanism in
achieving set targets
Evaluation
FUNCTIONS OF BUDGET

12. 12
 Authorization to take
actions within the
specified limits
 To achieve democratic
authorization for raising
taxes and spend money
Authorization
FUNCTIONS OF BUDGET

13. 13
 Planning Control
Framework
 Basis of a Controlling
Mechanism
Controlling
FUNCTIONS OF BUDGET

14. 14
 A budget may
provide a benchmark
against which actual
performance can be
measured
Performance
Measurement :
FUNCTIONS OF BUDGET

15. 15
 Form of an executive
order
 Tells the public explicitly
what the organization will
be doing
 Budget plans reflect the
intent
Communicating:
FUNCTIONS OF BUDGET

16. ORGANIZATIONAL BUDGET
16

17. 17
BUDGET DETERMINANTS
 Revenue
 Taxes of all types
 Foreign funding
 Self financing
 Expenditures
 Spending on goods &
services
 Government Investments
 Payments
 Debt servicing
Revenue

18. 18
 What must the state accomplish?
 How will the state measure progress and success?
 How much money does the state have available to
spend?
 What is the most efficient and effective way to
deliver essential services within available funds?
PRE-BUDGET CONSIDERATIONS

19. PRE-BUDGET CONSIDERATIONS
19
 What must the state accomplish?

20.  How will the state measure progress and success?
20
PRE-BUDGET CONSIDERATIONS
 Measuring parameter and
benchmark be defined
 Mission statement
supported by specific goals
and objectives
 Performance indicators for
accountability

21. 21
 How much money does the state have available to
spend?
 Estimation of total
external receipts and
internal revenues
 Spending must be less
than the forecasted
revenue
PRE-BUDGET CONSIDERATIONS

22. 22
PRE-BUDGET CONSIDERATIONS
 What is the most efficient and effective way to deliver
essential services within available funds?
 Achievement of greed
upon targets within
forecasted revenue
 Effective and efficient
delivery
 Achievements of state’s
core functions
Plan
Performnce
assessment
Imple
ment
Check
(Measure
results)
Act

23. 23
“After a search of sixty years for a
comprehensive theory of budgeting that would
resolve the basic budgeting problem, it is
somewhat disappointing to arrive at a
conclusion that no such theory exists and it is
unlikely that such a theory can ever be
formulated”
(Fozzard)
BUDGETING METHODOLOGIES

24. BUDGETING METHODOLOGIES
24
HOW TO
MANAGE FUNDS
ALLOCATION

25. 25
Incremental Budgeting
Based on actual expenditure
of previous year,
 Saves time but less reliable
 Suitable for stable
organizations
 Supports gradual changes
BUDGETING METHODOLOGIES

26. 26
Zero Based Budgeting
 Process starts from “scratch”
with the proposed activities for the
year
 More detailed and accurate
budgeting approach
 Takes more time and energy to
prepare
 Suitable for new organizations
and projects.
BUDGETING METHODOLOGIES

27. 27
Priority Based Budgeting
 Modification of the Zero-
Based approach
 Focuses on priorities of
organization
 Based on a thorough on-
going review of departmental
services
BUDGETING METHODOLOGIES

28. 28
Cash Flow Budget
 Based on the amount of
cash collect and pay out
 Cash Receipts and
payments are tallied on
monthly basis
 Suitable for small
corporate and enterprises
BUDGETING METHODOLOGIES
Exp
Cash influx

29. 29
Performance Based Budget
 Based on performance of a
given branch or unit
 Used in organization that
have measurable production
goals
 Suits larger organizations
with many branches
 Connects performance with
allocations
BUDGETING METHODOLOGIES

30. 30
Participatory Budgeting
 Originated in Brazil in the
mid-1980s
 Participation of local groups
 Practiced in local
government in Great Britain
 Community-led debates,
votes and public meetings.
BUDGETING METHODOLOGIES

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Contingency Budgeting
 Organizations where
detailed budgeting is difficult
 Used where reliable detail
lacks
 Compensated for by a
contingency budget to cover
as many areas as required
BUDGETING METHODOLOGIES

32. CASE STUDY : PAKISTAN
32

33. 33
 Self reliance
 Expansion of exports
 Containment of import of luxury and non-essential
goods
 Promotion of investment
 Reduction in income disparity
Budget Objectives :
CASE STUDY : PAKISTAN

34. 34
CASE STUDY : PAKISTAN
Participants of Fiscal Decision
Making
President of
Pakistan
Cabinet
Bureauc
racy
Military
Busines
s elite
Donors

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CASE STUDY : PAKISTAN
 Bureaucracy
 Ministry of Finance
 Planning Commission
 National Assembly
 Senate
 Parliamentary parties.

36. 36
NATIONAL BUDGET : YEAR 2012-13
 Terrorism
 Rocketing Oil Prices
 Economic depression
 Foreign Exchange
decline
 Debts

37. NATIONAL BUDGET : YEAR 2012-13
37

38. 38
CASE STUDY : PAKISTAN

39. 14%
6%
6%
12%
50%
12%
External reciepts
Bank Borrowing
Provinces Balance
Self Financing of
PSDP(Provinces)
Revenue Reciepts
Capital Recpts
39
NATIONAL BUDGET : YEAR 2012-13
Receipts Breakup 2012

40. 40
72%
21%
3%
2% 0% 0%
0%
0% 2%
0%
Public Service(71.86%)
Defence (21%)
Order and Safety (3%)
Economic Affairs (2%)
Environment (.03%)
Housing (.07%)
Health (.3%)
Culture & Religion (0.2%)
Education (2%)
Social Protection (.05%)
SECTOR WISE BUDGET ALLOC:YEAR 2012-13

41. 41
0%
42%
26%
22%
10%
Defence Administration Employees Related Expenses
Operating Expenses Physical Assets
Civil Works
DEFENCE AFFAIRS & SERVICES:YEAR 2012-13
Defense Affairs = Rs. 545,386 Mil

42. 42
Benazir Income Support Program Rs 70 billion
Export Development Fund Rs 10 billion
10% Discount for BISP card holders at utility Stores
100,000 youth to get internships
20% Adhoc Relief in Pay/Pension
Income Tax Exemption Limit enhanced up to Rs 400,000
NATIONAL BUDGET : YEAR 2012-13
Miscellaneous Allocations

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Payment of Loan to IMF $ 1.2 billion
Subsidies on electricity Rs 1,250 billion
Transport and Communication Rs 84 billion
Rs 37 billion for FATA, Gilgit-Baltistan and AJK
Rs 69 billion for Electricity sector, WAPDA, Electric
Companies will be given Rs 115 billion
Rs 360 billion for PSDP (for 96 ongoing projects)
NATIONAL BUDGET : YEAR 2012-13
Miscellaneous Allocations

44. 44
NATIONAL BUDGET : YEAR 2012-13
Upsides of budget 2012-13
 Sales Tax exemptions
 GST reduced from 17% to 16%
 All special excise duties have
been removed.
 Major rationalization in excise
duties
 FEDs have been eliminated or
rates decreased.
Cont’d . . .

45. 45
 Austerity in expenditures
except defense and debt
servicing.
 Development expenditures
protected and fully utilized.
 Interest rate brought down to
ease out inflationary pressure.
Upsides of budget 2012-13
NATIONAL BUDGET : YEAR 2012-13
…Cont’d

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 Real GDP growth had slowed
down
 External current account deficit
8½ percent of GDP
 Fiscal deficit rose to 7.6
percent
 Gross reserves declined from
$16 billion to $6 billion
 A rapid depreciation in value of
rupee.
Downsides of budget 2012-13
NATIONAL BUDGET : YEAR 2012-13

47. 47
 Multifarious internal and
external problems
 Debt service increased from
0.2% of GDP to 8.3% over last
decade.
 Big chunks of revenues being
spent on defense and interest
payments
 Exemptions and subsidies led
to inefficiency and larger deficits
Cont’d . . .
ANALYSIS

48. 48
 Lower industrial
production because of high
interest rates
 Huge Subsidies to power
sector is a burden on
country’s fiscal system after
NFC award
ANALYSIS
. . .Cont’d

49. 49
 Revenue generation and
expenditure frame work to be
reviewed
 Wide scale tax reforms
required
 Public Accounts Committee
(PAC) is to be strengthen and
restructuring of CBR
 Improvement of governance
RECOMMENDATIONS

50. 50
CONCLUSION