Budgeting for political uncertainty
ISLAMABAD: The finance ministry has started exploring options for the federal budget for fiscal year 2013-14.
“Timely general elections would ensure that the federal budget is passed by the new assembly, otherwise, an interim federal budget for three months only would have to be passed to meet the constitutional obligation for the start new fiscal year 2013-14,” said a senior official of the finance ministry.
In-case the National Assembly and four provincial assemblies are dissolved by March 15 and general elections are held within next 60 days, there would be no problem in presenting and seeking approval of the federal government from new assembly after general elections, the official said.
“Whatever the situation is the finance ministry has decided to finalise federal budget 2013-14 by March 31,” the official said.
“However, if elections are delayed due to any reason, there would be real problem as the constitutional obligation requires completion process for presentation and approval before June 30, 2013.”
Sources informed that senior officials at finance ministry have noted that there are three options for presentation and approval of the Federal Budget 2013-14 due to dissolution of assemblies and formation of new elected government.
Option one before the economic managers is that in case elections are held in time and new national assembly assumes its working by June 15, the budget would be presented and passed by it.
As a second option, the interim government would be asked to present budget for next fiscal year and get its formal approval from new national assembly when it assumes its working.
The third option is to allow interim government to present an interim budget only for first quarter of the fiscal year (July- September) period and allow the new national assembly to announce its own budget for the remaining three quarters of the next fiscal year 2013-14, added the official sources.
“The donor community has sought a firm commitment from all major political parties for initiating structural reforms for meeting the growing challenges faced by the economy,” the official said, adding that donors, especially the International Monetary Fund (IMF) during the recent Post Programme Monitoring (PPM) asked political leadership of the country for structural reforms agenda for a sound base for revival of economy.
“This especially included tax reforms and reforms in the power sector, not only to increase revenues but also to stop financial bleeding caused by Public Sector Enterprises (PSE),” the official said.
In a recent meeting held recently under the chairmanship of the finance minister, it was noted that in case present government gains success in general elections, there would be continuation of existing priorities and policies.
However, if there is a change in ruling setup, limited fiscal space would not allow new government to practically implement its priorities at least in the first year of its tenure.
“And if they tried to do so, it would strain relations with donor agencies,” source in the finance ministry said.
The official said that three major components, like debt servicing, transfers to provinces with a portion of current expenditures of the federal government along with salaries, pension and security expenditures would make three fourth of the total available resources.
The remaining portion would be allocated for development purposes and subsidies.
“If there is no change in the composition of the government after elections, the ongoing priorities would continue to remain intact,” sources close to the finance minister said, adding, “Otherwise, change in the government would result in massive changes in project portfolio with a possibility of drastic scrapping of around 20 to 30 per cent projects approved by the present government and yet to be implemented in the ground to create a space for the projects of their choice.”