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Economic growth and development Economic Planning and Budgeting around the world What is Economic planning? Importance of Economic planning Objectives of Economic planning Economic Development through planning Economic history of Pakistan Role of fiscal policy in economic development of Pakistan What are budgeting and its importance? Budgeting and its process in Pakistan Federal Board of Revenue and its role Main sources of revenue budget GDP ratios of Budget and balance of payment Concluding views References
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ECONOMIC PLANNING
Economic planning is the making of major economic decisions - what and how much is to be produced and to whom it is to be allocated by the conscious decision of a determine authority on the basis of a comprehensive survey of the economic system as a whole. Planning is a technique for achieving certain self-defined and pre-determined goals laid down by a central planning authority. It is a conceiving, initiating, regulating and controlling economic activity by the State according to set priorities with a view to achieving well-defined objectives within a given time. It is planning alone which can guarantee quick economic growth in under-developed countries.
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3. Price Stability Increase in price level hits the poor and fixed income people very much, whereas decrease in price reduces profit margins of the businessmen, which causes reduction in investment. One economic planning is to maintain the price stability. Through planning equal distribution of national wealth be made. The society should not be divided between "Haves and Have-nots" 4. Higher Standard of Living Economic Planning should ensure that good education; technical training and better medical facilities are available to all the people of the country. Every one should be provided a reasonable accommodation. Thus policy should standard of living of the masses. 5. Improving Balance of Payments All out efforts should be done under planning that balance of payments continues to improve. Export oriented and import substitutions industries should be given importance. Luxurious goods should be banned and small and agro-based industries should be given concessions and facilities. Imports should be reduced and export increased, in order to improve foreign exchange earnings. Dependence on foreign aid and grants should be curtailed.
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Period of decline of planning commission (1968 1977): This is the period of decline of Planning Commission as an important decision-making body coincided with the fall of Ayub Khans government. During the Yahiya Khan period (1969 1971), the serious planning on national level was completely ignored. The Third Five-Year Plan (1965 1970) was virtually abandoned by the Yahiya Khans government. In 1970, the Fourth Five-Year Plan (1970 1975) was made and it was also a big failure because of the worst political conditions and instable government policies. In 1972, the newly elected government of Z. A. Bhutto decided to run the economy through annual planning, rather than through a comprehensive five-year plan. During the same year, the Planning Commission was placed directly under the control of Ministry of Finance as a Division. Period of revival of planning commission (1978 1988): After taking charge of the government, the Zia-ul-Haqs regime emphasised on the needs of five-year plans. In early 1980s, the Zia government took steps to revive the Planning Commission as an effective and authoritative economic decision-making body. During this period, three Five-Year Plans were formulated. But the Government failed to pursue the plan mainly because of uncertain political as well as economic conditions at that time. The period of (1988 1999): The period of 1988 to 1999 the period of political and economic instability. During this period, four elected governments were dismissed by the President on the charges of corruption. The role of Planning Commission was over-shadowed by political decisions. Its role was just limited to the preparation and submission of reports. After the fall of Benazirs government in 1990, Nawaz Sharifs government came into power. During his tenure, he introduced privatisation, deregulation, and economic reform aimed at reducing structural impediments to sound economic development. His top priority was to denationalise some 115 public industrial enterprises, abolishing the government's monopoly in the financial sector, and selling utilities to private interests. In the parliamentary elections of 1993, Benazir Bhutto, once again, became the Prime Minister of Pakistan. The parliamentary election was held in 1997 and, once again, Mian Nawaz Sharif elected as the Prime Minister of Pakistan. Period of restructuring of economy (1999 2007): In October 1999, the Nawaz Sharif government was dismissed with the military coup by the Chief of Army Staff, General Pervez Musharraf. The era of General Pervez Musharraf is known as the era of economic and political restructuring. During this era, the economy grew at an average growth rate of 5.1%. President General Pervez Musharraf invited Mr. Shaukat Aziz to take charge of the Ministry of Finance. He very quickly assembled a team of highly trained economists and extremely talented civil servants to address the issue of the severe macroeconomic crisis and place the economy on a path of sustained higher growth, financial stability, and improved external balance of payments and make economy open, liberalised and market friendly. As a result, private sector had begun to play an active role in shaping structural changes in the economy. 6|Page
The above objectives cannot be achieved without proper planning. The Government of Pakistan is tapping various sources for raising its income to meet the growing development expenditure.
BUDGETING
A budget is a financial document used to project future income and expenses. Every government plans various economic activities and for undertaking these activities, it has to first raise revenues and then incur expenditures. Federal budget is the annual statement of the expenditures and revenues of the federal government with the laws and regulations that approve and support those expenditures and taxes. The main objectives of the federal governments of the developing and developed countries of the world are: to finance the activities of the federal government and to encourage economic growth in an atmosphere of stability.
The first purpose of the federal budget is to finance the business of the government by raising revenues through the direct and indirect taxes. After the great Depression of 1930s the federal budget is used through the fiscal policy to achieve macroeconomic objectives such as sustained long term economic growth, higher level of employment, price stability etc. Budget is very often divided into revenue and capital budget. The revenue budget covers items of recurring nature. The government raises revenue from direct and indirect taxes such as income tax, excise duty, custom duty etc. The capital budget includes those items which are meant for 7|Page
acquiring and disposal of capital assets. The development expenditures on construction of roads, railways, parts, industrial projects, irrigation projects etc. Generally the budget paper shows The financial accounts if the previous year, The budgeted figures and revised estimates for the current year, The budget for the coming year.
PROCESS OF BUDGETING
The Budget of a country reflects its social, economic, fiscal and financial responsibilities. It also reflects the government policies which it has for the future of the country.
CONSTITUTION:
In Pakistan legal system, various provisions Relating to budget appear in the constitution. The budget when proposed is a bill before the parliament & once accepted is an act of parliament. The procedure for general bills establishes that a bill can originate in either in national assembly or in senate. Once passed by the house in which it originates, it is transmitted to another house & if passed without amendment, is passed to the president for approval. The president must give his approval within 30 days. Once it receives presidential approval, it becomes a law.
Since 2003, it has been a requirement that the budget statement is copied to the senate at the same time as its presentation to the N.A. The senate may discuss the budget proposal & make recommendation to the N.A.
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The Inland Revenue Wing (Income Tax Officers) which brings in over 90% of FBR's collection and Customs Wing in Pakistan. For the purpose of collection of revenue and pursuing tax cheaters, FBR's powers & functions also include but are not limited to: carrying out inquiries and investigative audits into the tax affairs, commanding arrests, attachment as well as public auction of movable and immovable assets of a non-compliant. FUNCTIONS OF FBR/REVENUE DIVISION: In the existing setup, the Chairman, FBR, being the executive head of the Board as well as Secretary of the Revenue Division has the responsibility for Formulation and administration of fiscal policies, Levy and collection of federal taxes and Quasi-judicial function of hearing of appeals.
His responsibilities also involve interaction with the offices of the President, the Prime Minister, all economic Ministries as well as trade and industry.
imports, including all financial exports and imports. A negative balance of payments means that more money is flowing out of the country than coming in, and vice versa. Pakistans economy has been weakened by persistent political instability, security problems, infrastructure gaps and large macroeconomic imbalances. Nonetheless, it does have attractions for the adventurous: it is the sixth largest economy in Asia. The economy needs significant industrial and infrastructure investment to relieve capacity constraints and boost growth. Moreover, inflation is rising on the back of the August floods and surging global food prices. Inflation spikes are very destabilizing given high rates of poverty.
IMF loans and record workers remittances have strengthened the balance of payments. But the current account deficit will widen, as food and capital imports increase in the wake of the August floods, and farm exports fall. Pakistans external position is very vulnerable to higher commodity prices, a drop in external financial assistance, or rising global risk aversion in financial markets.
CONCLUDING VIEWS
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FBR should improve the working with proper check and make strict rules and regulations for revenue collection. Exemptions should not be there especially on agriculture tax. Reform General Sales Tax (GST) and impose it. Maintenance the GDP ratio. Industries should produce more to increase the export so that the balance of payment is maintained.
REFERENCES:
Economic of Pakistan by M.Saeed Nasir and Syed Kamal hyder Leading Issues Facing Pakistan Economy www.finance.gov.pk/ en.wikipedia.org/wiki/Economy_of_Pakistan http://www.investorwords.com http://www.valleycountyeconomicdevelopment.com
http://www.friendsmania.net/forum/b-com-part-2-ii-economics-pakistannotes/28447.htm#ixzz1LwxioAFo
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