Federal Budget 2018-19: A Populist Budgets in Pakistan History

The government has announced one of the most populist budgets in the history of Pakistan, giving relief to almost all sectors. Preparing a populist budget is not a negative point as governments are duty-bound to maximize the welfare of the citizens. But without an alternate program to offset the loss of tax revenue that will occur due to tax relief, the future government may be in trouble to get revenue and expenditure targets.

The direct tax relief given to the general public is unprecedented in the history of Pakistan. This relief is a welcome step, but the government has not presented any concrete plan to offset the revenue loss due to this tax relief. Although the federal government has not provided any data, there are estimates that nearly half of the one million active taxpayers will be out of the list as the threshold for taxable income has increased from PKR400,000 to PKR1,200,000. The measures like barring non-filers from purchasing a property of more than 4 million rupees may not increase the horizontal tax base in the Pakistani environment. Therefore, the FBR will have to work more diligently and scientifically to offset the apparent loss in revenue and achieve the 13% enhanced targets compared to last year.  

The trends for the last four years show that reliance on foreign assistance is always increased in revised estimates compared to budget estimates. These budget estimates figures for foreign assistance are kept on the lower side to avoid criticism. During FY 2015-16, the difference between budget estimates and revised estimates was 10.89%. The difference was as high as 21% and 46% during the subsequent two years. The budget estimates for foreign assistance for the FY 2018-19 are PKR 1118023 million, and the prorate figures would be PKR1632313 million. With the proposed tax relief and no concrete plan for increasing the tax net, these figures can be even high. 

Despite high claims of transparency and accountability, the federal government has failed to take practical steps in the right direction. One such example is the delay in establishing the Pakistan Information Commission. The commission is an appellate body to be found under the Right of Access to Information Act, 2017, enacted in October last year. However, the due date for establishing the commission has already elapsed. Moreover, there are no indications from the government to establish the commission. The absence of allocations for the said commission indicates that the government has not planned to launch the commission during the next year.  

CPDI's instant analysis of the federal budget 2018-19 examines (a) transparency of projects, (b) geographic share of Development Projects and (c) analysis of supplementary projects 2017-18. First, the analysis reveals 21% of development projects are allocated in a non-transparent way. The project details, i.e. geographical area, budget allocation to specific heads etc., are not mentioned. Secondly, an analysis of the geographic share of development projects shows interesting data where 10.85% of total projects are planned in Punjab, with the cost of 11.37% of the total development budget. 13.5% of projects are planned in Sindh, with a cost of 14.47% of the total development budget. 11.16% of projects are planned in KP with the cost of 9.94% of the total development budget. Lastly, 19.75% of projects are planned in Balochistan, with a cost of 4.85% of the total development budget.  

According to the new water policy, the government will enhance the allocation of water resources to 10% of the total development budget. The allocations will be increased to 20% by the year 2030. However, the budget analysis shows that this target is still far from being achieved. The total allocation for the Ministry of Water Resources in 2018-19 Budget is PKR 62026.495 Million, which is 5.4% of the entire development budget. 

The 100-100-100 dream of the federal government, to enroll, train and graduate 100% children,  may not be realized with the current allocation to the education sector. The budget estimates for primary education for FY2018-19 are PKR 2034 million, which are only 10% higher than last year's revised estimates of PKR 1843 million. The allocations for primary and secondary schools have been done in blocks, a non-transparent way of making the budget. Further, with the proposed allocations, it would not be possible to efficiently run the affairs of primary and secondary schools. Studies have shown an urgent need for at least a 30% increase in the non-salary current budget to efficiently run the affairs of primary and secondary schools under the federal government. A big chunk of the proposed 10% increase in the education budget will be required to accommodate 10% increase in salary, and the tiny amount will be left to increase the non-salary current budget. The operating expenses are increased by 2.7% only compared to the revised estimates of the last year. There has been a drastic decrease in budget allocation to physical assets for primary schools. As against the previous year's revised estimates of PKR 9.7 million, this year's proposed allocation is PKR 573,000 only, which shows a decrease of 94%. 

The budget allocation for secondary education (middle schools) is not much different from the primary schools' allocation trends. The proposed budget for the FY 2018-19 is PKR637 million, which is 15% higher than last year's revised estimates of PKR 556 million. Here again, the most significant increase is in employee-related expenses, which shows a 19% increase. On the other hand, operating expenses for the middle schools have been reduced by 4%, from 111 million in FY 2017-18 to 107 million in FY 2018-19. Similarly, the purchase of Physical assets has shown a decrease of 94%.  

The proposed budget for secondary education (high schools) has increased from PKR 1,752 million in FY 2017-18 to PKR2135 million in FY 2018-19, which is 22% higher. The most significant jump is in employee-related expenses, which increased from PKR 1434 million in FY 2017-18 to PKR 1811 million in FY 2018-19, thus registering an increase of 26%. The previous trend of allocation in operating expenses and physical assets continued for high schools. Operating expenses increased by 3% only from revised estimates of PKR 279 million for FY 2017-18 to PKR 285 million in FY2018-19. The budget allocation for physical assets again showed a downward trend. PKR 1.2 million were allocated for FY 2018-19 as against PKR 3.55 million, which is a decrease of 66%.