IN A RECENT article in Dawn, it has been proved, if a proof was needed, with ten years’ data that revenue targets have always been missed. It is either on account of absence of will on the part of the government or sheer failure of good governance.

The emphasis of the IMF-World Bank combine has always been on revenue collection, and improvement and restructuring of tax collecting machinery. Experience shows that all attempts at increasing revenues have failed in spite of ‘draconian’ measures adopted about two years back. Over 9 years period from 1992-93 income had increased by 124 per cent, whereas expenditure over the same period outstripped the income and increased by 138 per cent. Income has failed to keep pace with the expenditure and will continue to do so. Isn’t it time to pause, think and accept the fact that the limit of revenue collection has been reached especially when we are in a period of recession, a fact not officially admitted? To quote Shahid Kardar (Dawn, September 7, 2002) “It is the expenditure side of the budget equation that needs to be addressed...”

There is a widely held belief that budget estimates in respect of expenditure are always understated and actual expenditure is always higher. Table 1 below would tend to confirm this hypothesis. Actual expenditure for 9 years from 1992-93 to 2000-01 would show that the expenditure has usually been more than the budget estimates. During the period, the actual expenditure has been less than the budget estimates in four years and higher in six. The maximum shortfall was Rs36 billion in 1999-00.

Table 1 would also show that actual expenditure has been higher than the revised estimates. Column 7 in the above table clearly shows the disparity. Of the 9 years, only three years saw actual expenditure to be less than the revised estimates. In the remaining years, it was higher by as much as RS43 billion in 1998-99 and Rs22 billion in 1999-00. These two years appear to be particularly mismanaged years. One has to look for the causes. Revised estimates are supposed to be more accurate because they are firmed up half way through the financial year. The gap between the actual expenditure and the revised estimates should therefore not be as high as Rs43 billion or Rs22 billion.

Table 2 (column 5) will show that actual current expenditure has more often than not been higher than the budget estimates. Actual expenditure as compared to the revised estimates was again higher by a wide margin. Three years, 1995-96, 1998-99 and 1999-00 saw huge imbalances. 1999-00 was an unusual year when the actual year exceeded by Rs67 billion or 13 per cent Something must have been terribly wrong with the fiscal management of this country.

There are two explanations for the disparity. One, that the ministry of finance failed to forecast the actual expenditure in the midst of the financial year and two, it was helpless in refusing to comply with the orders either to over spend the budgeted expenditure or provide for totally unbudgeted expenditure.

Table 3 offers yet another interesting insight into the performance of the ministry of finance. Contrary to the practice where revised estimates for the current expenditure are kept unrealistically high to justify subsequent expenditure, in case of development expenditure, they are kept quite low, as Table 3 shows. They are always revised downwards except for one solitary year 1992-93 when it exceeded the budget estimates. Not only that actual expenditure turned out to be more than both the budget estimates and revised estimates, 1997-08 was also an unusual year when the actual expenditure exceeded both the budget estimates and revised estimates. What is significant is that except for two years out of nine, the actual development expenditure was less than the budget estimates? Drastic cuts were made in 1996-99, 1988-99,1900-00 and 2000-1. This was done to square the figures and meet the deficit criteria mandated by the loaning agencies. Besides, there is no vested interest to protest cuts in development expenditure or to protect the budgeted expenditure.

Actual expenditure as compared to revised estimates has been less in three years and more in the other six. This is on account of the fact, that cuts have already been effected in the process of revision. Another interesting feature worthy of note is the development expenditure has been on the wane. It was 46 per cent of the current expenditure in 1991-92 and came down to 21 per cent in 2001-02. Defence expenditure which was Rs65 billion in 1990-91 increased to Rs150 billion in 2001-02 (131 per cent), not counting the huge expenditure on account of paramilitaries like Frontier Constabulary, Coast Guards and a large number of other outfits charged to non-defence heads o budget.

Expenditure on education increased from Rs2-9 billion to Rs6.5 billion over the same period. This analysis points to our disoriented priorities and forebodes an uncertain future.