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Budget 1990-91 an assessment.

Budget 1990-91 an Assessment

The defence expenditure has been swelling from year to year. Expenditure on defence has increased from Rs. 45.295 billion in 1987-88 to Rs. 61.926 billion in 1989-90. In 1990-91 the defence expenditure would increase to Rs. 63.273 billion. The increase in the revised estimates of defence expenditure was 18.6 per cent. Whereas the increase in the budget estimates of 1990-91 was 2.2 per cent. As percentage of the total expenditure defence expenditure was 25.6 per cent in 1982-83 and it increased to 28.8 per cent in 1989-90. This estimates for 1990-91 is 27.4 per cent.

Mr. Ehsanul Haq Piracha presented Federal Budget 1990-91 for a total amount of Rs.230.184 billion. This amount would be mobilised as follows: Rs. 173.385 billion as internal resources and Rs. 41.089 billion as external resources making a total of Rs. 214.475 billion leaving a gap of Rs. 15.71 billion. The gap has been widened to Rs. 20.31 billion due to 10 per cent adhoc relief to Government servants and elected representatives and subsidy on concessional credit for rural industry. This gap is to be filled in the following way:

(Rs. in billion)

Mobilisation through Tax
Measures 7.875
Through non-tax measures 5.076
Gap after Budgetary Measures 7.359
 20.310


The gap of Rs. 7.359 million will be met through improvement in tax collection and bank borrowings.

The salient features of the budget 1990-91 are as under:

a) The total budgetary outlay of Budget 1990-91 will be Rs. 230185.4 million. This will be 7.2 per cent higher than the Revised Estimates of 1989-90, which is an account of a 5.4 per cent increase in Current Expenditure and 14.5 per cent in the Development Expenditure (ADP). b) Defence, Debt Servicing. Investible funds, Grants to Local Authorities and Subsidies account for Rs. 140945.2 million, constituting 87.3 per cent of the Current Expenditure of Rs. 161779.1 million. The remaining 12.7 per cent or Rs. 20551.0 million is on other functions i.e. General Administration, Law and Order, Social Services, Community Services, Economic Services and Unallocable. c) The share of Current Expenditure in the total budgetary outlay will be 72.6 per cent in 1990-91 which by 1.8 per cent lesser than Revised Estimates 1989-90. d) The expenditure on running of Civil Government will increase slightly in the Budget Estimates 1990-91 over the Revised Estimates 1989-90 i.e. 7.4 per cent. e) Expenditure on Defence has increased to Rs. 63273.1 million or by 2.2 per cent over the Revised Estimates. The share of Defence in Current Expenditure is 39.1 per cent. f) Transfer of resources to the Provinces as their share in divisible taxes has increased substantially. They will receive Rs. 34217.5 million during 1990-91 which will be higher by Rs. 3338.8 million or 10.8 per cent than last year's Revised Estimates. g) Besides financing their development programmes and extending grants for specific purposes, the Federal Government will provide Rs. 5406.3 million as non-obligatory grants to provinces. h) Net Capital Receipts of the Federal Government are placed at Rs. 25648.9 million showing a reduction of 28.0 per cent over the Revised Estimates. i) The small saving schemes of the Government are placed at Rs. 14526.8 million in Budget Estimates 1990-91 compared to Rs. 13198.0 million in the Revised Estimates.

The comparative Budgetary position of 1989-90 (Budget and Revised) and 1990-91 Budget is as under:

Comparative Budgetary Position 1989-90 & 1990-91
 (Rs. in million)
 1989-90 1990-91
 Budget Revised Budget
Resources: 203827.9 209800.4 214475.1
a. Internal Resources 161344.8 171381.7 173385.1


Revenue Receipts
 (Net) 133030.4 130223.2 141188.9
 Capital Receipts (Net) 24775.6 35610.0 25648.9


Self-Financing by
 Autonomous Bodies 3538.8 5548.5 6547.3
b. External Resources 4248.1 38418.7 41089.9
Expenditure: 208315.6 214809.0 230185.4
- Current Expenditure 142400.2 152883.2 161779.1


- Non-Obligatory Grants

to Provinces 9915.4 6925.8 5406.3 - Development Expenditure
 (ADP) 56000.0 55000.0 63000.0
Deficit/Surplus 4487.7 5008.6 15710.3


The above budgetary position indicates a budgetary gap of Rs. 15.7 billion in 1990-91 Budget. However, based on the same figures, the overall deficit works out to Rs. 66.4 billion which is the difference between total expenditure (less repayment of foreign loans and also less repayment of short term credits) and revenue receipts (both tax and non-tax) and self-financing of autonomous bodies for the Federal as well as the Provincial Governments. In working out the overall deficit inter-government adjustments are ignored. [Tabular Data Omitted]

Current Expenditure

The current expenditure during 1990-91 would be Rs. 161.779 billion showing a rise of 5.8 per cent over the revised current expenditure of Rs. 152.883 billion. As a ratio of GDP the current expenditure in 1989-90 was 18.54 per cent against 19.77 per cent in 1989-90. On some expenditure, Government has no control. For instance defence would take Rs. 63.273 billion or 39.11 per cent of the total expenditure while Rs. 68.419 billion would be taken away by debt servicing. This worked out to 42.29 per cent. It is a common practice that expenditure on defence, administration and the like is under estimated. For instance current expenditure was budgeted at Rs. 142.400 billion in 1989-90. Revised estimates of current expenditure came to Rs. 152.883 billion showing a rise of 7.36 per cent.

Current Expenditure
Year Rs. billion % Increase
1987-88 108.328 --
1988-89 129.610 20
1989-90 152.883 26
1990-91 161.779 6


From 1987-88 to 1989-90 current expenditure showed a rise of 46 per cent showing an average annual increase of 23 per cent. No one can imagine to reduce the expenditure. According to Mr. V. A. Jaffrey, there are 129 departments of the Federal Government. A reduction in the existing staff would lead to unemployment. Debt servicing and defence take away about 83 per cent of the current expenditure. A large part of subsidies totalling Rs. 6.662 billion is consumed by government corporations including PTC, Pakistan Steel and KESC. This amount was about Rs. 3.68 billion in 1989-90 which worked out to 55.2 per cent of the total amount spent on subsidies.

Defence Expenditure

The defence expenditure has been swelling from year to year. Expenditure on defence has increased from Rs. 45.295 billion in 1987-88 to Rs. 61.926 billion in 1989-90. In 1990-91 the defence expenditure would increase to Rs. 63.273 billion. The increase in the revised estimates of defence expenditure was 18.6 per cent. Whereas the increase in the budget estimates of 1990-91 was 2.2 per cent. As percentage of the total expenditure defence expenditure was 25.6 per cent in 1982-83 and it increased to 28.8 per cent in 1989-90. This estimates for 1990-91 is 27.4 per cent. The draft Seventh Plan proposed that for the next five years growth in defence expenditure be restricted to 3.0 per cent per year in real terms. At present there is no check nor there is any accountability of defence expenditure.

The defence is treated like a holy cow and the National Assembly just skip this item. We spend about 40 per cent on defence of the country. The National Assembly must discuss this huge amount particularly when scandalous Ferranti deal came to light in which General Zia and others were involved in a fake defence purchase. The National Assembly should have demanded full facts on Ferranti deal.

Defence Expenditure
 (Rs. in billion)
 Current Defence % of Cur-
 Expen- Expen- rent Ex-
Year diture diture penditure
1983-84 59.96 26.75 44.61
1984-85 77.24 31.79 41.15
1985-86 87.52 35.12 40.25
1986-87 105.57 38.89 36.83
1987-88 108.32 45.29 41.81
1988-89 129.61 48.32 37.28
1989-90 152.88 61.92 40.50
1990-91 161.78 63.27 39.10


Tax Revenue

Tax revenue in 1990-91 would be Rs. 115.47 billion showing a rise of 8.2 per cent over the revised estimates of 106.71 billion. Direct tax on income and wealth would be Rs. 18.134 billion in 1990-91 showing a rise of 10.0 per cent. Tax GDP ratio worked out to 18.89 per cent in 1989-90 as compared to 18.08 per cent in 1988-89 and 14.40 per cent in 1987-88. Indirect taxes make the major contribution of Rs. 97.34 billion or 84.2 per cent of the total revenue. Major revenue earner would be Customs (41.5 per cent), Federal Excise (18.0 per cent), Sales Tax (16.7 per cent) and surcharges (9.6 per cent).

Direct and Indirect Taxes

More and more reliance has been placed on indirect taxes. The ratio of direct and indirect taxes was 18/82 in 1984-85. This ratio had declined to 13/87 in 1988-89 and slightly improved to 14/86 in 1989-90. The ratio in 1990-91 would work out to 14.2/85.8.

In the direct taxation effort income and corporation tax would give Rs. 1.813 billion. The share of direct taxation would work out barely 14.2 per cent of the total revenue. Indirect form, popular with the government, is to yield as high as 85.8 per cent of the total levies. No qualitative change is discernible in the method of taxation. This is in contrast to an earlier impression given to the public.

Direct & Indirect Taxes
 (Rs. in billion)
Year Tax Revenue Direct Percentage Indirect Percentage
1984-85 52.681 9.619 18.2 43.062 81.8
1985-86 58.207 9.880 16.9 48.327 83.1
1986-87 62.241 10.387 17.1 51.854 82.9
1987-88 68.790 12.193 17.7 56.591 82.3
1988-89 106.258 13.974 13.1 92.909 86.9
1989-90 117.765 16.486 14.0 90.229 86.0
1990-91(*) 115.477 18.134 14.2 97.343 85.8


(*)Budget Figures

PHOTO : Mr. Ihsanul Haq Paracha presenting the Budget 1990-91
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Title Annotation:Pakistan
Author:Haidari, Iqbal
Publication:Economic Review
Date:Jul 1, 1990
Words:1715
Previous Article:Economic survey 1989-90.
Next Article:An analysis of the Finance Act 1990.
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