LAHORE – The federal budget 2012-13 will be announced on Friday, but a review of the government’s economic performance in the outgoing fiscal year, which ends on June 30, gives one a fair idea of what is in store for the masses – more taxes, both direct and indirect! The budget deficit touched the figure of almost Rs900 billion in only the first nine months of the outgoing fiscal year and traditionally it increases at a much faster pace in the last quarter since the development expenditure picks up as time runs out.

The provisional budgetary statement for the first nine months of the outgoing fiscal year (July 2011-March 2012), uploaded on website of the Finance Division on May 23, clearly indicates that the budget expenditure will exceed the estimates by at least Rs700 billion by the end of the outgoing fiscal year. As the budget revenue has not increased proportionally to counterbalance this, negative effects of the increase in the budget expenditure are likely to felt by all the Pakistanis, in particular the poor, in the forthcoming fiscal year.

Despite tall claims by the government’s economic wizards, the situation on the ground is grim. In only the first nine months of the outgoing fiscal year, the country has spent more than Rs578 billion under the head of ‘servicing of domestic debt’, while the estimate for the whole year was Rs714.671 billion. This implies that the government will have to spend an additional amount of at least Rs75 billion in the ongoing fiscal year under this head.

In the recent past, the government had to borrow heavily from its own people – through prize bonds, saving schemes and floating of new bonds – to manage its economic affairs. This is one of the main reasons that banks have high interest rates and new bonds are being floated every now and then – the government wants the people to deposit their money with the banks and financial institutions rather than investing it. So, in effect, the government’s claims of promoting economic growth and employment generation proved hollow once it was faced with economic crunch, mainly because of unplanned expenditure. So much for our rulers’ economic farsightedness and continuation in policies!

The provisional budget figures for the first nine months of the outgoing fiscal year make interesting reading. They tell us that, unlike previous years, the defence budget will not exceed the estimates. This is a promising development, but for the fact that in this era of economic wizards it is not difficult, especially in a country such as Pakistan, to charge certain expenditures under different heads. According to some media reports, the recent increase in education-related expenditure and decrease in defence expenditure explain this beyond a point of doubt. Also, almost Rs72 billion are being paid in pensions to retired armed forces personnel from the civilian budget under the head of ‘General Public Service’.

Coming to the performance of different heads of the budget in the first nine months of the outgoing fiscal year, the current or recurring expenditure stands out. Its original estimate was Rs2,315 billion, but Rs2,154 billion had already been spent under this head until March 31, 2012. According to even a conservative estimate, the actual current expenditure for 2011-12 would reach Rs3,000 billion by the end of the year, implying an abnormal increase of almost Rs700 billion.

In a civilised country, this would have been enough for a government to pack its bags and give chance to others who might be able to manage the economy more prudently. Those who are currently managing the economy are guilty on many counts and should be brought to task if the government is serious in affecting any positive change in the lives of the people. A mere example should do.

In the federal budget 2010-11, the expenditure was estimated at Rs2,423 billion. In the federal budget 2011-12, the revised estimate of expenditure was raised to Rs2,560. However, when the accounting was completed, the actual expenditure turned out to be Rs3,415 billion (Rs855 billion more than what the government had estimated just a month ago). What is even more incomprehensible is that how, then, the government thought that Rs2,767 billion would be enough for the fiscal year 2011-12, especially considering the inflation and the increasing size of the government.

The government’s total expenditure in the period July 2011-March 2012 was Rs2,582 billion, while the budget estimate for the whole fiscal year is Rs2,767 billion. Going by this pace and considering that the development expenditure traditionally picks up in the last quarter (April-June) of a fiscal year, as well as the fact that this is the election year, the expenditure by June 30 is likely to be in the range of Rs3,550 billion – or about Rs800 billion more than the budget estimate.

The Public Sector Development Programme (PSDP) has to bear the brunt whenever there is an abnormal increase in the current expenditure, like the one in the outgoing fiscal year. Subsequently, only Rs421 billion of the allocated Rs730 billion for the PSDP have been spent in the first nine months of the outgoing fiscal year. Even if the pace of development programmes is accelerated, it seems highly improbable that the total allocation for development would be utilised by the end of the fiscal year.

It comes as a surprise that the total expenditure on defence in the first nine months of the current fiscal year has only been Rs348 billion. The defence budget for the fiscal year is Rs495 billion and it seems that, for the first time in the country’s history, the government would not be able to fully utilise the allocated funds. As a matter of fact, successive governments have always overspent on defence on one pretext or the others. In this scenario, this appears simply too good to be true!

Don’t pin too much hope on the budget!