Supplementary grants hit record amid ‘austerity’

• Parliament okays Rs9.4tr in expenditure overruns, five times higher than amount approved a year ago
• 86pc of these grants, worth over Rs8tr, booked against last 45 days of FY23 alone
• Massive chunk of Rs6.55tr attributed to govt borrowing

ISLAMABAD: As parliament authorised the federal government on June 28 to impose over Rs1.7 trillion in additional taxes for the current fiscal year, it was also compelled to retrospectively approve a record Rs9.4tr for expenditure overruns and re-appropriations, nearly five times more than the previous year’s amount.

This massive overspending occurred despite claims of austerity and tight fiscal control by three successive administrations — PDM, caretakers and the incumbent coalition government — amid ongoing economic stabilisation efforts.

Most of these supplementary grants are described as “charged expenditure” out of the Federal Consolidated Fund, which is just presented to parliament for its information and is taken as approved without voting. Simply put, parliament cannot reject these grants because the amount has already been consumed.

Fresh budget documents released by the Ministry of Finance suggest that Finance Minister Muhammad Aura­ngzeb secured parliamentary approval for supplementary grants worth Rs9.374tr, 389 per cent higher than the Rs1.915tr approved a year earlier.

Paradoxically, almost 86pc (more than Rs8tr) of the expenditure overruns were booked against the last 45 days of the 2022-23 fiscal year, i.e. between May 16 to June 30, 2023.

This has raised the possibility that overspending in the just-ended fiscal year may turn out to be even higher, for which the government has reported only Rs1.3tr or 14pc of the supplementary grants, as of May 17.

The expenditure made in the subsequent 45 days (May 17 to June 30, 2024) would be disclosed only by the end of the current fiscal, another fait accompli for parliament. This puts a question mark on government processes leading to budget estimates and expenditures.

A substantial share of about Rs6.55tr (almost 70pc) in expenditure overruns was caused by massive borrowing by the government to repay or service existing debts, while some big chunks were consumed by the power sector’s circular debt and payments to K-Electric.

Of the Rs6.55tr supplementary grants, Rs5.043tr was required to repay domestic debt and Rs1.5tr to service domestic debt — both in the last 45 days of the fiscal year 2022-23.

Additional funds included Rs214 billion for foreign debt servicing to the Asian Development Bank and Rs188bn for short-term loans from the Islamic Development Bank.

Documents placed before parliament by the finance ministry indicate that subsidies, power sector, water division, defence services, health-related expenditures, civil armed forces and related agencies stand out in exceeding budgetary allocations.

These also included Rs55bn for additional funds for pension and other retirement benefits of the defence division, while Rs14bn was required to meet additional needs of two (north and south) special security divisions (SSD) set up for CPEC security.

On top of this, Rs20bn in unbudgeted funds were provided to the defence division for Green Corporate Initiative and another Rs27bn for defence services in 2023-24 again for the Special Security Division, Pak-Iran border fencing and Jinnah Naval Base. Another unapproved amount of Rs320bn was spent on LNG-based government-owned power producers, including Rs57bn to K-Electric.

But there were also noticeable expenditures, which could be described as extravagant and avoidable, in view of the austerity policy currently in place, a senior government official said.

For example, the Prime Minister’s Office, which should otherwise lead by example, secured two separate supplementary grants worth Rs39 million and Rs42m for “honoraria” to its officers. In most cases, the finance ministry did not even bother to place on record the actual heads for supplementary grants while simply giving a one-liner: “to meet budget shortfall”.

The ministry said that Article 84 of the Constitution empowered the government to authorise expenditure from the Federal Consolidated Fund as “supplementary grants and lay the same before the National Assembly in terms of Article 80 to 83 of the Constitution”.

Ministry officials said these expenditures could not have been met from within the budgeted allocations under various grants and appropriations or legitimately postponed during a financial year.

Therefore, it sought regular and technical supplementary grants worth Rs8.049tr for the fiscal year 2022-23 and Rs1.325tr for 2023-24.

These include regular supplementary grants worth Rs6.685tr and technical supplementary grants of Rs1.364tr for 2022-23. For 2023-24, the entire Rs1.325tr amount was on account of technical supplementary grants.

In simple terms, regular supplementary grants put an additional burden on the public exchequer, but strangely, the government failed to see them coming ahead of the budget, even though it had been responsible for currency devaluation and interest rate hikes.

On the other hand, technical supplementary grants mean the surrender of funds from one expenditure head and its authorisation for use in another, generally without any major fiscal burden. However, supplementary grants are a confirmation of expenditure overrun or spending without a legal sanction and directly impact government finances.

Substantial supplementary grants were required for parliamentarians’ development schemes, maintenance and constructions of residences and rest houses of the Supreme Court, Shariat Court and high court judges, expanded polio initiative and other vaccines besides, and grants to Radio Pakistan and Associated Press of Pakistan.

Supplementary grants were also required for payment of bills to media houses for special campaigns.

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

Published in Dawn, July 8th, 2024