Whenever a government in Pakistan presents a budget, there is scepticism as usual about the integrity of both the budget and macroeconomic figures presented by the government.
It is not a secret that past governments at all levels have “fudged” or manipulated budget numbers and economic statistics for both political purposes and attempts to hoodwink external economic institutions like the IMF. When we talk of good governance, this also includes fiscal governance or management of the public treasury by elected officials and public officeholders.
We need to improve the transparency, accuracy, and integrity of the budgeting process to make it a more meaningful exercise not just a jugglery of numbers that no one in the government or public has a clue what the economic impact is.
Adopting the best practices from other democratic countries, I strongly propose that we establish a Parliamentary Budget Office (PBO), which many countries have done:
- USA: Congressional Budget Office created in 1974
- United Kingdom: Office for Budget Responsibility created in 2010
- Canada: Parliamentary Budget Office created in 2006
- Australia: Parliamentary Budget Office created in 2012
- Korea: National Assembly Budget Office established in 2003
- Sweden: Fiscal Policy Council in Sweden established in 2007
The main objective of these economic institutions is providing independent and non-partisan analysis of the budget cycle, economic issues, and the financial implications of legislative proposals.
Given the public’s mistrust of the political system, the need for a PBO in Pakistan becomes ever more crucial to restoring faith in democracy.
The institutions named above can be a template for establishing a Pakistani equivalent, as all of them have earned a reputation of providing independent, non-political, professional, credible, and neutral analysis.
- An Act of Parliament should define the PBO’s legislative mandate and powers.
- Parliamentary Budget Officer will head the Parliamentary Budget Office, who is an officer of both houses of parliament for a six-year term that can be extended for only one additional term of six years.
- The PBO should provide independent analysis to Parliament on the budget, the estimates and other documents, as well as matters of particular significance relating to the nation’s finances or economy; and at the request of a committee or a parliamentarian, to estimate the financial cost of any proposal that relates to matters over which Parliament has jurisdiction. Certain committees can also request analyses of the nation’s finances or economy or the estimates.
- In the months before a general election, the PBO has an added mandate of responding to requests from political parties or independent members of the National Assembly to estimate the financial cost of any election campaign proposal that the party or member is considering making.
- The PBO’s would support Parliament by providing analysis, including analysis of macroeconomic and fiscal policy, to improve the quality of parliamentary debate and promote better budget transparency and accountability.
- Parliamentary Budget Officer regularly testifies before a parliamentary committee.
- All PBO reports are accessible to the public in both hard and soft copy.
- State of the Nation’s Finances: independent budget projections; estimates of the federal or provincial government’s structural budget balances, budget balance risk analysis, and along-term fiscal sustainability report.
- Estimates Review: Expenditure analysis tracking the implementation of fiscal stimulus measures including impact assessment, reporting standards, flow of funds analysis, lapse forecasting and reports on the risk associated with the government’s spending restraint.
- Economic Trends: analysis on a range of issues including country’s output gap, labour markets, and current economic indicators.
- Financial Analysis: costing of policy measures.
The analysis and reports produced by the PBO will be a gauge of its effectiveness and integrity. The parliamentarians and the public will be able to determine how independent and credible the PBO is. Therefore, the head and staff of PBO through its working must ensure its independence, trust, and commitment to excellence.
The book ‘Why Nations Fail’ by Daron Acemoglu and James Robinson pointed out that one of three factors that hampers prosperity occurs when legislatures cannot hold the executive to account.
This is exactly the problem we face in Pakistan as our national and provincial assemblies have failed miserably in this duty. The establishment of PBOs at both the center and provincial level will aid legislatures in the accountability of the executive, contribute to fiscal transparency, and improve governance.