The word budget has been derived from the French word ‘Bougett’ which means a pouch or a wallet. It was coined by England’s Chancellor of Exchequer, Mr William Ewart Gladstone, in 1860. The budget is taken in different ways in different countries; when we speak of the ‘budget’ of a department, it means expenditure estimates only. While in England the term is used to state only the revenue and taxation part of the financial plan. On the contrary, in USA, the term ‘budgeting’ is used to describe the entire financial process consisting of the preparation of the budget, enactment by legislature, execution, accounting and audit. In Pakistan, budget is called Annual Budget Statement.
Budget is used as a tool to manage various activities that include providing of information, avoid duplication of activities and information on expenditures and performance. It also envisages socioeconomic changes by way of progressive taxation, promoting certain economic activities. It is put under scrutiny of legislature and after thorough debate and discussion approval is accorded.
In Pakistan, the budget shows receipts and payments of the government under three heads:
1. Consolidated fund, including all revenues and loans and receipts by the government
2. Public accounts, which consists of all receipts and payments in the nature of deposit accounts
3. Contingencies fund which are placed to meet unforeseen expenditure
The budgetary year in Pakistan starts from first July of every year and ends on 30th June of the next calendar year. Before its presentation before the National Assembly by the Finance Minister, the budget is discussed and approved by the cabinet.
The budget process starts in October by issuance of budget call circular by Ministry of Finance whereby all the departments and agencies are asked to submit their detailed estimates, expenditures, receipts keeping in view commitments and past actual(s). These are then routed through respective ministries/divisions to Ministry of Finance where they are further put to detailed scrutiny before final inclusion in the budget.
The budget is divided into two sections: revenue budget and capital budget. The revenue part consists of defence, debt, repayment of loan, running of government and other activities financed through taxation, duties and miscellaneous receipts.
The capital budget is designed to create material assets meant to add into capital assets.
The annual development plan is prepared in consultation with the provinces and is approved by ECNEC. Ministry of Finance and Planning Commission play pivotal role in preparing the plan and the executive agencies are communicated sector-wise ceiling and priorities keeping in view overall requirements of the economy.
After detailed scrutiny and discussion with the executing agencies, the proposals are finalized and then are further discussed in the Priorities Committee followed by Annual Plan Coordination Committee and National Economic Council. The component of resource estimates is an essential feature of the budget as success of whole plan depends on the availability of resources. The main components of resource estimates are:
Public savings which simply include the excess of revenue receipt over current expenditure of the government.
Net capital receipts of the federal and provincial governments, which include saving schemes, recovery of loans, etc.
Other important resources of the federal government are foreign economic assistance, bank borrowings, etc.