Govt gets parliamentary approval for Rs9.4trn in expenditure overruns for FY23 M Haris

Despite tall claims of austerity, the federal government secured parliamentary approval for Rs9.374 trillion in expenditure overruns and re-appropriations, a 389% increase from the Rs1.915 trillion approved the previous year.

As per a news report, this overspending occurred despite claims of austerity and fiscal control by three successive administrations—the Pakistan Democratic Movement (PDM), the caretaker government, and the current coalition government—amid ongoing economic stabilisation efforts.

Most of these supplementary grants are classified as “charged expenditure” from the Federal Consolidated Fund, which parliament is informed of but cannot vote against, as the amounts have already been consumed.

Almost 86% (over Rs8 trillion) of the expenditure overruns were booked in the last 45 days of the 2022-23 fiscal year, from May 16 to June 30, 2023. This raises concerns that overspending for the just-ended fiscal year may be even higher, with only Rs1.3 trillion or 14% of supplementary grants reported by May 17. Expenditures made from May 17 to June 30, 2024, will be disclosed by the end of the current fiscal year.

A big portion of about Rs6.55 trillion (almost 70%) in expenditure overruns was due to massive borrowing by the government to repay or service existing debts. Significant funds were also allocated to the power sector’s circular debt and payments to K-Electric.

Of the Rs6.55 trillion supplementary grants, Rs5.043 trillion was required to repay domestic debt, and Rs1.5 trillion was needed to service domestic debt, both in the last 45 days of FY23. Additional funds included Rs214 billion for foreign debt servicing to the Asian Development Bank and Rs188 billion for short-term loans from the Islamic Development Bank.

Documents from the finance ministry indicated that subsidies, the power sector, the water division, defence services, health-related expenditures, civil armed forces, and related agencies exceeded budgetary allocations. These also included Rs55 billion for defence pensions and other retirement benefits, and Rs14 billion for the special security divisions set up for China-Pakistan Economic Corridor (CPEC) security.

Moreover, Rs20 billion in unbudgeted funds were provided for the defence division’s Green Corporate Initiative, and another Rs27 billion for defence services in 2023-24 for the Special Security Division, Pak-Iran border fencing, and Jinnah Naval Base. An unapproved amount of Rs320 billion was spent on LNG-based government-owned power producers, including Rs57 billion to K-Electric.

The Prime Minister’s Office also secured supplementary grants worth Rs39 million and Rs42 million for “honoraria” to its officers, despite the austerity policy in place.

The Ministry of Finance stated that Article 84 of the Constitution empowers the government to authorise expenditure from the Federal Consolidated Fund as supplementary grants, which must then be laid before the National Assembly as per Articles 80 to 83 of the Constitution. These expenditures could not have been met from within budgeted allocations or legitimately postponed during a financial year.

Therefore, the ministry sought regular and technical supplementary grants worth Rs8.049 trillion for FY23 and Rs1.325 trillion for FY24. Regular supplementary grants add a burden on the public exchequer, while technical supplementary grants involve reallocating funds from one expenditure head to another without a major fiscal burden.

Significant supplementary grants were required for parliamentarians’ development schemes, maintenance and construction of residences and rest houses for Supreme Court, Shariat Court, and high court judges, expanded polio initiatives, vaccines, and grants to Radio Pakistan and Associated Press of Pakistan. Supplementary grants were also needed to pay bills to media houses for special campaigns.

Under the Constitution, the government must secure parliamentary approval for the federal budget before any spending. However, the government often seeks retrospective approval for additional amounts already spent, leaving parliament with no choice but to regularise these expenditures.