BUDGET WORKSHOP

BY

MUHAMMAD JAN
 SCHEME OF PRESENTATION

• Introduction— Public Financial Management

• Budget Definition

• Framework—Constitution, Act, Rules, Regulations

• Receipts Vs Expenditure Budget

• Receipts Budget & NFC Award

• Expenditure Budget—Non-Development vs Development

• National Budget—Exercise

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PUBLIC FINANCIAL MANAGEMENT

 Deals with the management of public

resources: the allocation and use of resources
collected from the economy.

Three basic elements of Public Finance:

i. Public expenditure
ii. Revenues
iii. Government debt
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PUBLIC FINANCIAL MANAGEMENT

It includes all components of a country’s budget

process… including:
 Strategic planning, medium-term expenditure
framework, annual budgeting
 Revenue management,
 Procurement,
 Control, accounting, reporting, monitoring and
evaluation, audit and oversight.
PUBLIC FINANCIAL MANAGEMENT SYSTEM

• Finance
– Budget preparation, execution,
monitoring, review etc.
• Accounting

• Auditing

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BUDGET DEFINITION

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BUDGET—Generic Definition
• A plan that outlines an organization's
financial and operational goals.
• An action plan that helps a business to:
 Allocate resources,
 Evaluate performance, and
 Formulate plans.
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BUDGET—Public Sector

The most important instrument of the executive to carry

out its policies.
“… the plan of the future financial activities of the
government prepared annually, comprising a
statement of the government’s proposed
expenditures, revenues, borrowing and other
financial transactions. It is submitted to
parliament, which authorises expenditure…”

Allen & Tommasi (2001)

 ANNUAL BUDGET—Specific
 It is the proposed revenue and expenditure of the
Government for a 12-month period.
 The annual budget is the Government’s most
important policy instrument.
 Political Exercise

Approved Budget

Executive Legislature
Legislatur
e
 DEFINITION—PUBLIC SECTOR

• An Estimate of:
–Receipts, & Expenditure
–In Numerical Terms
–For the Next Financial Year
 PUBLIC SECTOR BUDGET

• A government's annual financial plan

describing the proposed expenditures and

the means of financing them.

• Deficit vs Surplus Budget.

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 BUDGET

• Not an end in itself

• Rather, a means
– For furthering the achievements of objectives

• No spending without budget

 ANNUAL BUDGET
A DYNAMIC PROCESS

• Critical budget reforms are undertaken each year

in the annual budget followed by periodic review
and scrutiny.
• An on-going process and does not end as the
budget is passed.
• Rather, it triggers the process of legislative
oversight over government expenditures which
demands the attentions of the elected
representatives round the year.

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 Corporate Vs Public Sector Budgeting

???
• Objectives in Corporate Sector

• Objectives in Public Sector

 Corporate Vs Public Sector Budgeting

• Objectives in Corporate Sector—Profit Planning

• Objectives in Public Sector—Service Delivery

 BUDGET

• Federal
• Provincial
• AJK
• GB
• Districts
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 BUDGET—FEDERAL

• Finance Division

• National Assembly

• Federal Organisations

• AGPR—Under the CGA

• D.G Federal Audit under AGP

• PAC of the National Assembly

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 BUDGET—PROVINCIAL

• Finance Department (KP, Punjab etc.)

• Provincial Assembly concerned

• Provincial Organisations

• Accountant General KP, Punjab, etc.

• D.G Provincial Audit under AGP

• PAC of the Provincial Assembly

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 BUDGET—AJK, GB, DISTRICTS

• Same arrangements

• Own finance, own assembly, own

accounts, own PAC/ZAC

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 FRAMEWORK
Legal and
 Constitution
Regulator of the Islamic Republic of
y
Pakistan
Provisions
 governing
Public Finance Management Act, 2019
Budgeting
(Amended up to 30th June 2020)
 Budget Manual 2020
 FRAMEWORK
 Legal
FM & Powers
and of PAO Regulations
Regulator
2021yreplacing System of Financial Control
Provisions
and Budgeting-2006
governing
 Budgeting
Accounting Policies and Procedures
Manual
 General Financial Rules
 RECEIPTS VS EXPENDITURE

Independent streams

• Estimated Receipts—Source

• Estimated Expenditure—destination

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 RECEIPTS

As per constitution

• Consolidated Fund

• Public Account

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 CONSTITUTIONAL PROVISIONS

• Federal—Article 78—88

• Provincial—120—127

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 FEDERAL/PROVINCIAL CONSOLIDATED
FUND

 All revenues received by the Federal/Provincial

Government,
 All loans raised by that Government, and
 All moneys received by it in repayment of any
loan
Federal Consolidated Fund-Article 78 (1)
Provincial Consolidated Fund-Article-118 (2)
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 SUMMARY OF RECEIPTS

• Federal receipts are categorized as

• Tax Revenue Receipts,

Consolidated
• Non-Tax Revenue Receipts fund
• Capital Receipts,

• Public Account Receipts

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 SUMMARY OF RECEIPTS

• As per Section 22 of the Public Finance

Management Act 2019, the operation of the
Federal Consolidated Fund and the Public
Account of the Federation vests in the
Finance Division

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BUDGET PREPARATION PROCESS

i. Issuance of ‘Budget Call Circular to the
Principal Accounting Officers (PAOs)
ii. Submission of Budget forecast by the Principal
Accounting Officer
iii. Review and approval of budget estimates and
additional demands (current + development) by
the Demand Review Committee
iv. Preparation of Budget Strategy Paper and its
presentation in the Cabinet
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BUDGET PREPARATION PROCESS

iv. Issuance of Indicative Budget Ceilings for
current and development budget to all PAOs

v. Filling of the BO/NIS Forms

vi. Submission of forms by Ministries / Divisions

for Current Budget and Development Budget
 Preparation
Preparation
ABS
ABS
Policy
Policy
Formulation
Formulation Authorization
Authorization
Scheduleof
Schedule of
AuthorisedExpdr
Authorised Expdr

BUDGET
CYCLE
Review
Review

Reporting
Reporting
and
and Implementation
Implementation
Monitoring
Monitoring
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ANNAUAL BUDGET STATEMENT
• Tabled in the assembly under article 80(1) for the
Federal Government & includes:
• Receipts: Balances of all budgetary receipts, e.g.
– Revenue Receipts, Capital Receipts, External Receipts,
Public Account Receipts (net balances).
– May include privatization receipts and credit from
banking sector
• Expenditure:
– Broken down into current & development
– Expenditure on revenue & capital
– Charged & voted (other than charged)
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 BUDGET SUMMARY
RECEIPTS EXPENDITURE
• Federal Consolidated Fund (5+6) • Current Expenditure on Revenue Account
• 1. Tax Revenue Receipts Direct Taxes Indirect Taxes • 1. General public service
• 2. Non-Tax Receipts Income from Property Receipt • 2. Defense Affairs and Services
from Civil Administration Miscellaneous Receipts • 3. Public Order Safety Affairs
• 3. Total Revenue Receipts (1+2)
• 4. Economic Affairs
• 4. Capital Receipts Recovery of Investment
• 5. Environment Protection
Recovery of Loans and Advances Domestic Debt
Receipts (net) • 6. Housing and Community
• 5. Total Internal Receipts (3+4) • 7. Health Affairs and Services
• 6. External Receipts Loans Grants • 8. Recreational, Culture Service
• 7. Public Account Receipts (net) Deferred Liabilities • 9. Education Affairs Services
(net) Deposits and Reserves (net) • 10. Social Protection
• 8. Gross Federal Resources (5+6+7) • a. Current Expenditure on Revenue Account
• 9. Less Provincial Share in Federal Taxes • b. Current Expenditure on Capital Account
• 10. Net Federal Resources (8-9) • c. Development Expenditure on Revenue
• 11. Cash Balances built up by the Provinces Account
• 12. Privatization Proceeds • d. Development Expenditure on Capital
• 13. Credit from Banking Sector Account
• Total Resources (10+11+12+13) • Total Expenditure (a+b+c+d)
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 BUDGET SUMMARY—Revenue
Fed. Consolidated Fund 5+6

7. Public Account Receipts (net)

1. Tax Revenue Receipts 8. Gross Federal Resources
(5+6+7)
2. Non-Tax Revenue Receipts 9. Less Provincial Share in Federal
Taxes
3. Total Revenue Receipts (1+2) 10. Net Federal Resources (8-9)
11. Cash Balances built up by the
4. Capital Receipts Provinces
12. Privatization Proceeds
5. Total Internal Receipts (3+4)
13. Credit from Banking Sector
6. External Receipts Loans Grants Total Resources
(10+11+12+13) 33
 BUDGET SUMMARY—Expenditure

Current Expdr on Revenue Total Expenditure

a. Current Expenditure on
• 1. General public service Revenue account
• 2. Defense Affairs and Services b. Current Expenditure on Capital
• 3. Public Order Safety Affairs Account
• 4. Economic Affairs c. Development Expenditure on
• 5. Environment Protection Revenue Account
• 6. Housing and Community d. Development Expenditure on
• Capital Account
7. Health Affairs and Services
• 8. Recreational, Culture Service
• Total Expenditure (a+b+c+d)
9. Education Affairs Services
• 10. Social Protection
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 DISTRIBUTION OF RESOURCES
Federal Level
• Collections—by Federal Government

• Minus Mandatory (Charged) Expenditures

• Minus straight transfers—royalties/net hydel profit

• = Divisible Pool—Verticle / Horizontal Distribution

• As per NFC Award

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National Finance Commission
• The NFC is constituted under Article 160 of the Constitution
Vertical Distribution Pre-7th NFC 7th NFC
Share of Federation 55% 42.50%
Share of Provinces 45 57.50

(Pre-7th
Province 7th NFC
NFC)
Punjab 57.50% 51.74%
Sindh 24 24.55
Khyber Pakhtunkhwa 13.80 14.62
Balochistan 5.08 9.09
 CRITERIA FOR HORIZONTAL DISTRIBUTION

Multiple Factor Criterion Weightage

1. Population 82%

2. Poverty Backwardness 10.30%

3. Revenue Generation 5%

4. Inverse Population Density 2.70%

DISTRIBUTION OF RESOURCES—Provincial Level

• Collections—by Provincial Govt.

• NFC/Grants from Federal Government….

• Minus Mandatory (Charged) Expenditures

• = Provincial Divisible Pool

As per PFC Award

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 EXPENDITURE BUDGET

• Non-Development

• Development

????
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 NON-DEVELOPMENT BUDGET

• Also called:
–Current budget
–Recurring budget
–Operating budget

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 DEVELOPMENT BUDGET

• Creation of assets

• What is an asset???

• Imagine a world without development

budget
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 IMPORTANCE

• Vision—Mission—Strategic Thinking

• Role of Project Management

• Involve large investments over long periods

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RISKS IN CAPITAL EXPENDITURE

• Devastating effects if projects are not assessed properly

• Irreversible expenditure

• Decisions can’t be undone easily

• Unforeseen circumstances

• High degree of uncertainty

• Not easy to measure all costs and the potential benefits.

• Thus, appraisal should be as thorough as possible

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 DEVELOPMENT BUDGET

• PSDP—Public Sector Development

Program

• ADP—Annual Development Plan

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 PROJECT APPROVING BODIES
• Executive Committee of National
Economic Council (ECNEC)
• Central Development Working Party
(CDWP)
• Departmental Development Working Party
(DDWP)
• Provincial Development Working Party
(PDWP)

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 POWERS TO APPROVE
• DDWP—Up to Rs. 1.00 b
• CDWP—Up to 7.50 b

• ECNEC: Above 7.5 B

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 PC-II
• For huge projects—Above Rs.500
million for infrastructure projects
• Before PC-I

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 DEVELOPMENT BUDGET

• Forums to approve PC—I

• DDWP

• CDWP/PDWP

• ECNEC
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 DEVELOPMENT BUDGET

• Forums to approve PC—I

• DDWP

• CDWP/PDWP

• ECNEC
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NATIONAL BUDGET
2023-24

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 BUDGET—PREFACE
• The Annual Budget Statement containing estimated
receipts and expenditure in terms of Article 80(1) of
the Constitution of Islamic Republic of Pakistan
1973 is being laid before the National Assembly of
Pakistan for financial year 2023-24, which will also
be transmitted to the Senate of Pakistan as required
under Article 73(1).
• The statement fulfils the requirements of Article
80(2) of the Constitution, showing separately the
charged expenditures and other expenditures to be
made from the Federal Consolidated Fund.
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 PREFACE
• It also distinguishes expenditure on revenue
account from other expenditure.
• Section 4 of the Public Finance Management Act,
2019 provides that the Federal Government shall
lay before National Assembly, Annual Budget
Statement including a statement of the purpose
and estimates for each demand for grant,
statement of contingent liabilities of the Federal
Government and statement of fiscal risk.

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 PREFACE
• Moreover, as per Section 8 of the Act, a statement of
estimated tax expenditure of the Federal Government
shall be laid before the National Assembly.
• All these statements have been made part of Annual
Budget Statement.
• Furthermore, under Sections 5 and 10 of the Fiscal
Responsibility and Debt Limitation Act, 2005, a
Medium Term Budgetary Statement and Statements
of Responsibility are also required to be laid before
National Assembly, which have also been made part
of the Annual Budget Statement.
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 MTBF

Annual budget preparation is carried out

within a framework which takes into
account the resources expected to be
available to the government over the
medium term.
 WHY MTBF?
• To decentralize resource allocation from Finance to line
ministries.
• Gradual empowerment of line ministries in budgetary
management within a medium term fiscal framework.
• Indicative Budget Ceilings (IBC)
 NATIONAL BUDGET
• 2022-23

• 2023-24 as presented in the Assembly

• 2023-24 as passed by the Assembly after

incorporating changes proposed by IMF

• Supplementary Budget for 2021-22 & 2022-23

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 BUDGET 2022-23
• Receipts:
• Tax Revenue Receipts: Rs. 7,480 billion
• Non-Tax Revenue Receipts: 1,935
• Total Revenue Receipts 9,405
• Capital Receipts: 2,375
• Total (Consolidated Fund)…. 11,780
• Expenditure:
• Current Expenditure 12,744
• Development Expenditure 1,024
• Total: 13,768
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 BUDGET 2023-24 (Rs. in Billion)
• 2023-24 2022-23
– Tax Collection FBR: 9,200 (7,200)
– Non-Tax Receipts: 2,963 (1,618)
– Capital Receipts: ???
• Total Budget (Revenue): 14,460
• Expenses:
• Interest Payment Servicing: 7,303 (3,950)
• Defence: 1,804 (1,500)
• Pension: 761 (530)
• BISP/HEC/Grants to GB/….PR 1,464
• PSDP 1,150
• Subsidy 1,074 (699)
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 BUDGET 2023-24 (Rs. in Billion)
• 2023-24 2022-23
– Tax Collection FBR: 9,200 (7,200)
– Non-Tax Receipts: 2,963 (1,618)
– Capital Receipts: ???
• Total Budget (Revenue): 14,480
• Expenses:
• Interest Payment Servicing: 7,303 (3,950)
• Defence: 1,804 (1,500)
• Pension: 801 (530)
• BISP/HEC/Grants to GB/….PR 1,464
• PSDP 1,150
• Subsidy 1,074 (699)
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 NEWS
• ISLAMABAD:The National Assembly passed
the Finance Bill 2023-24 on Sunday with
certain amendments to the proposed
budgetary measures with the revised outlay of
Rs14.48 trillion.
• The new measures included Rs.215 billion
additional taxes through amendments to the
original bill, which was presented on June 9.

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IMPORTANCE, OBJECTIVES &
FUNCITON
OF BUDGET IN PFMS

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 IMPORTANCE OF BUDGET IN THE PFMS

• Prepared and Authorized by the Legislature

• Becomes an Act

• A Financial and Operational Plan

• All PFMS revolves round the Budget

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 IMPORTANCE OF BUDGET IN THE PFMS

• Accounts Follow the Budget

• Audit/review of Accounts and Findings Based on

Budget Allocation and Authorization by the
Parliament.

• All Govt. Activities Executed Through Budget

• Monitoring and Control Tool

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 OBJECTIVES AND FUNCTIONS OF BUDGETS

• A tool:
– for implementation of medium and long term
economic & social plans—involves actual allocation
of resources.
– To enable the govt. to know its tax and non tax
revenues in order to tailor its expenditures.
– To enable govt. to control inflation through control of
deficits.
OBJECTIVES AND FUNCTIONS OF BUDGETS
• To foster overall growth in the economy through
infrastructure development and stimulate
spending.
• To pump resources into development of targeted
priority sectors
• Can be used by governments to discourage the
growth of socially and economically undesirable
sectors either by removing subsidies or heavily
taxing it.
OBJECTIVES AND FUNCTIONS OF BUDGET

• Mechanism for correcting imbalances in the

distribution of incomes and wealth in the
population through Taxation.

• A social tool of attacking and alleviating poverty

through use of subsidies and direct transfer
payments.

• Used to pull back economy out of recessions.

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