A layman's guide to some budgetary, economic terms used in Pakistan

Budget deficit is a fiscal situation in which govt's total expenditures exceed its revenues

LAHORE (Raja Arsalan Khan) – Every year budget is presented by the federal government and each of the provinces/ federating units as a document containing not only complicated figures but also intricate terminologies, which makes it difficult for a common man to fathom what it is all about. 

Here is a guide so that you can understand some of these.

Federal Consolidated Fund:

The answer is provided in Article 78 of the Constitution which reads:

“1. All revenues received by the Federal Government, all loans raised by that Government and all moneys received by it in repayment of any loan, shall form part of a consolidated fund, to be known as the Federal Consolidated Fund.

2. All other moneys -

a. received by or on behalf of the Federal Government; or

b. received by or deposited with the Supreme Court or any other court established under the authority of the Federation; shall be credited to the Public Account of the Federation.” 

Budget Deficit 

A budget deficit is a fiscal situation in which a government's total expenditures exceed its total revenues over a specific period, resulting in a negative balance.

Foreign Reserves 

People are often unable to comprehend how and why one media outlet is quoting a different amount as the country’s foreign reserves while the other cites another. 

Well! There is no contradiction. Why? Because the foreign reserves are held both by the State Bank of Pakistan (SBP) say A and the commercial banks say B. 

So if someone quotes a lesser amount, it means the foreign reserves with the SBP while the larger one is the sum of the two – A+B = Net Foreign Reserves

Development Budget

Another source of the confusion is the development budget outlay for a particular sector [for example health] and the total amount allocated for the same.

So when the document says a larger overall amount is allocated for health it means all expenses – ranging from salaries to other administrative cost including the development budget.

However, the development budget for the same health sector only refers to the smaller sum which is used for launching new projects [constructing new hospitals] or improving the existing facilities [provision of new equipment and related structure etc].

NFC (National Finance Commission) Award

The Article 160 covering this subject says the president [on the prime minister’s advice] shall establish the NFC for a period of five years. This panel headed by the prime minister is responsible for [besides other matters related to the matters concerning the provinces] distribution between the Federation and the Provinces of the net proceeds of the taxes mentioned in Clause (3); making of grants-in-aid by the Centre to the provincial governments; and the exercise by the federal and the provincial governments of the borrowing powers conferred by the Constitution.

In short, the NFC Award, which must be reviewed after 10 years, is the instrument to transfer and allocate money to the provinces and also to determine the Centre’s share from the Federal Divisible Pool under various heads including the royalty these federating units get from natural resources.

The formula used for this purpose is roughly based upon the agreement reached between all sides before or by finalising the NFC Award. Under the current NFC Award, 57.5 per cent of the amount under the Federal Divisible Pool belongs to the provinces while remaining rests with the Centre.

Out of this money transferred to the provinces, Punjab gets 51.74pc, Sindh 24.55pc, Khyber Pakhtunkhwa 14.62pc and Balochistan 9.09pc.

Moreover, under no circumstances the share of any province would be reduced in any budget or the future NFC Award.