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Preparation of Annual Budget

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45 views5 pages

Preparation of Annual Budget

Uploaded by

Haseeb Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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The budget is technically the document that includes the government’s expenditure

and revenue proposals, reflecting its policy priorities and fiscal targets.
Looking at any one aspect of the overall budget system in isolation misses the
important interaction between the various parts.
The budget cycle usually has four stages:
 Budget Formulation, when the budget plan is put together by the executive
branch of government;
 Enactment, when the budget plan may be debate, altered, ad approved by the
legislative branch;
 Execution, when the policies of the budget are carried out by the government;
and
 Auditing and Assessment, when are accounted for and assessed for
effectiveness.

1. Preparation & Formulation Stage:


 The initial formulation of the budget occurs almost exclusively within the
executive branch of government, though it can include a number of actors
within the branch.
 Ministry of Finance or a division within it coordinates and manages the
formulation of the budget.
 This process takes weeks to several months, it depends on the extent to
which departments are involved and their views are taken into account.
 In Pakistan, budget making as an annual process starts in October each
year on issuance of Budget Call Circular (BCC) by Ministry of Finance.
BSS is issued to all the ministries, divisions and departments of the
government.
 The finance division or department will review and consolidate the
estimates to ensure that overall budget policy and objectives have been
met after consultation with concerned ministries and departments when
required.
 In the month of June, the National Economic Council (NCE) meets. The
NCE is a constitutional forum chaired by the Prime Minister with
representation from the provinces.
 After passing through NEC, the budget finally gets approved in the federal
cabinet before the finance minister presents it to National Assembly for its
enactment.

2. Enactment Stage:
 The second stage of the budget is discussed in the legislature and
consequently enacted into law.
 This stage begins when the executive formally proposes the budget to the
legislature.
 The process of discussion of the budget by the legislatures ends when the
budget is adopted by the legislature, either intact or with amendments.
 The budget can also be rejected by the legislature and, in some countries,
it replaced by the legislature’s own proposal.

3. Implementation Stage:
 This stage of the process occurs once the budget has been enacted.
 Governments differ widely in how they regulate and monitor spending to
ensure adherence to budgets.
 Ministries/divisions are required to send a monthly statement of
expenditure to the Ministry of Finance through financial advisors.

4. Audit
 This is the last stage in the budget cycle includes a number of activities that
aim to measure whether there is an effective use of public resources.
 Ideally, the executive branch should report extensively on its fiscal activities
to the legislature and the public.
 The audit office should have the capacity to produce accurate reports in a
timely manner.

Budget Calendar of Federal Budget in Pakistan


Budget Call Circular August – October
Budget Estimation November – January
Detailed scrutiny by Controlling Officer November – December
Detailed scrutiny by Finance Department January – February
Formulation of Budget proposals by Finance April
Department
Federal Cabinet approval May/June
Budget in Federal Assembly June
Authentication of the schedule of approved June
expenditure by Parliament
Funds release by Finance Department July

One linear Questions


 Ministry of Finance the authority of the government of Pakistan prepares
budget.
 Budget year in Pakistan is from 1st July to 30th June.
 Budget preparation process starts in the month of October.
 On issuing of Budget all Circular, budget preparation process starts.
 Development requirements are determined in the month of November to
February.
 Scrutiny of data that is collected about budget is take place in the month of
March.
 Consideration of the budget is taking place in the month of April.
 Budget Call Circular is issued to the administrative ministries/divisions.
 Budget estimates are prepared separately for Development expenditures and
non-development expenditures.
 Budget is divided into two categories.
o Revenue Budget
o Capital Budget
 Budget which deals with creation of assets and development expenditures is
called Capital Budget.
 The budget which deals with day-to-day expenditures / non-development
expenditures is called Revenue Budget.
 The program which deals with inclusion of development expenditures in the
annual budget is called Annual Development Program.
 The National Economic Council (NEC) authority finally approved the annual
development program.
 Budget proposal prepared by ministry of finance is presented to Federal
Cabinet.
 After the presentation of the budget/finance bill to the federal cabinet then it is
presented to the National Assembly.
 Within 7 Days, the period in which the budget/finance bill is to be
approved/rejected by senate after presentation.
 The Prime Minister authenticates the schedule of authorized expenditures.
 Which are the stages of discussion of the budget:
o First general discussion on the budget.
o Second discussion on chartered expenditures.
o Third discussion on grants

Preparation of Budget
 Non-development expenditure (Current Expenditures)
o The ongoing administrative operations within a ministry or department, in
fulfilling its policy objectives.
o Includes: Salaries and Allowances of officers and staff.
o Two types of non-development expenditures:
 Permanent non-development expenditures
 Temporary non-development expenditures
o Permanent non-development expenditures:
 That has previously been approved and is continuing.
 Includes: permanent staffing establishments, travelling, fixed
allowances and contingent expenditures.
o Temporary non-development expenditures:
 These are the new items of non-development expenditures such as
temporary additions to existing establishments or services that have
either continued from year to year on a temporary basis or
 Have been newly sanctioned and not included in the current year’s
budget.
 Temporary non-development expenditures are submitted as the “New
Items Statement” (NIS) or Part II Budget.
 Development Expenditures
o Activities conducted and managed distinctly as individual projects, with
finite start and end dates and clearly specified deliverables.
o Nature of Development Expenditures:
 It typically involves the construction or improvement of physical
assets or the development of human resources.

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