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The ongoing power tussle left the bureaucracy clueless in budget preparation

The prevailing political chaos, especially the opposition parties’ move to topple the government through a no-confidence motion against Prime Minister Imran Khan is not only creating political instability but also damaging the already fragile economy.

The ongoing power tussle left the bureaucracy clueless in the preparation of a budget document for the next financial year 2022/23. However, experts believe that next year will be the year of the election so the budget will be populist and relief-oriented.

Traditionally, the budget preparations for the next financial year begins in the last quarter of the financial year but because of the prevailing political uncertainty, the Planning Commission and the Ministry of Finance are still waiting for a green signal from the government to define the contours of the upcoming budget.

A senior government official in the Planning Commission said owing to the International Monetary Fund (IMF) programme, the budget making is a tricky and painstaking exercise.

“Since we’re in the IMF programme, the budget making is a very tricky and painstaking exercise and now with the prevailing political uncertainty, no senior official is willing to take any decision,” the senior official told BOL News.


Two priority committees are involved in the budget making exercise. The first one will finalise the annual budgets of all the ministries and the second one after consultation with all the relevant stakeholders will propose the Annual Development Plan (ADP), he said.

The ministries had already sent their budgetary requirements to the Priority Committee before the deadline of February 28, while the committee is in consultation with the representatives of all the ministries to consider the budgetary allocations.

However, the Planning Commission official said the working of the second priority committee will start from April 1 and since it will finalise all the development projects under the ADP, the ministry needs policy directives from the government.

“We hope that the funding of the ongoing projects will not be stopped or delayed because under the Public Finance Act 2019 no new project can be included in the ADP and the ongoing projects will get more allocations of funds,” he said.

However, keeping in mind the past practices, a change in the government always has negative implications on the Public Sector Development Programme.

Former adviser to the Ministry of Finance and NUST Business School Principal and Dean Dr Ashfaque Hasan Khan said that working on a budget document in the prevailing political situation is an uphill task.


“For over 12 years, budgets of the country were made under my supervision and we used to start working on the budget in March just before the last quarter of the financial year,” he said.

The concerns of the Ministry of Finance and the Planning Commission are legitimate and unfortunately no one is paying attention to them.

“The financial and economic situation of the country is very gloomy and I foresee further deterioration in the economy in the days to come. The ongoing IMF programme is responsible for the downfall of the PTI government,” he added.

According to Dr Khan, if the government will be removed through the no-confidence motion then whatever little amount will be allocated under the PSDP will be disbursed on political considerations.

The way the Debt Limitation Act was repeatedly violated in the last 14 years, the fate of public finance is likely to be the same and it will be put under the carpet.

He expressed the hope that whoever will be in power after the ongoing political crisis will not renegotiate with the IMF for another programme after the completion of the existing one in September this year.


“The IMF programme is hampering our economic growth in a way that our sovereignty is compromised and we will remain dependent on the West,” he said.

Senior Economist Sajid Amin Javed said that in the upcoming budget two major components: debt servicing and defence budget, are unlikely to be disturbed but definitely the PSDP is likely to be affected by the ongoing political tussle.

However, whether PTI will remain in power or the coalition government will be formed, the budget for the next year is likely to be populist and relief-oriented.

“No political party is in a position to take difficult and anti-people decisions because it will undermine their performance in the next elections, which are likely to be held after the budget,” he said.

For Javed, if a new government is in place, it should not discard or abandon the projects, which are beneficial to the common man.

“I think whoever will be in power, they should further strengthen and broaden the coverage of Ehsas Programme because it is benefiting those who are living below the poverty line and desperately need supplementary income to meet their basic needs,” he said.


The IMF is also closely monitoring the political situation of Pakistan and will not come with any unjust demand. However, he said, because of political uncertainty the revenue collection and inflows from abroad are likely to be slowed down, which can create problems for the government.

Ministry of Finance former adviser Dr Khaqan Najeeb said that the budget FY23 needs to be finalised considering financing options, the needed repair of expenditure side, as the current expenditure has swelled to Rs7.5 trillion from Rs4.3 trillion.

The burgeoning pensions and rising markup payments remain unfinished reforms agenda, he said, adding that the revenue reforms, covering the personal income tax regime and doing away with the concessions, also need a serious effort. The political leadership’s direction in the budget is always important in all aspects, especially the relief side for the population.

It is important for Pakistan to complete the ongoing IMF programme, Dr Najeeb said, adding that the external financing needs swelling over $34 billion requires successful completion of the seventh review, which of course besides technical issues, is overshadowed by the evolving political uncertainty. Consensus with the IMF on the contours of the budget is also needed.

The International Monetary Fund has estimated that the Prime Minister’s Relief Package, slashing down petrol, diesel and electricity prices, as well as doling out of the Kamyab Pakistan Programme (KPP) loans would cost the government almost double the amount of Rs425 billion against the official estimates of Rs220 billion.

The estimates calculated by the IMF and shared with the Pakistani authorities showed that the petrol and diesel prices in the international market stood at $120/barrel, which according to the IMF staff, requires Rs55 billion/month subsidy and in totality will require Rs220 billion in four months (March-June) period of the current fiscal year, he said.


The government had calculated lower estimates since the price in the international market stood at $85/barrel and they had estimated that it could go up to $95/barrel. Similarly, the rupee-dollar parity stood at Rs178 against the dollar, which has now crossed Rs184 against the dollar. The Rs5/unit reduction in the electricity tariff will have a financial impact of Rs136 billion for a four months period.

The IMF has also assessed that the Kamyab Pakistan Programme (KPP) would cost a subsidy of Rs69 billion in four months of the current fiscal year. It also pointed out that the tax amnesty for the industrial sector was a persistent and continuous structural benchmark agreed by Islamabad on the occasion of the conclusion of the 6th review under the IMF programme but it breached this condition blatantly and cannot justify it before the IMF’s Executive Board.

In a statement, the Ministry of Finance said upon completion of the technical talks, the text of the Memorandum on Economic and Financial Policies (MEFP) for the 7th review will come under discussion. The government is confident that the finalisation of the MEFP would lead to the IMF Board meeting towards the end of April.

The government remains committed to completing the IMF programme successfully in September, the ministry added.

For Dr Najeeb, on the technical side discussions with the IMF need handling of the breach of continuous structural benchmarks, indicating that no new amnesties would be given during the programme duration.

The authorities have hopefully clarified that the amnesty is more of an industrial package that entails five-year tax holidays on projects with investment by Pakistani expatriates in Pakistan, he maintained.


In the current scenario, whoever will be in power by the time of the upcoming budget major challenges are likely to emerge when the government has to pay back $23 billion to foreign lenders and control swelling current account deficit, which already crossed $12 billion in the first eight months of the current financial year.


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