ISLAMABAD: The International Monetary Fund (IMF) and Pakistan have agreed to disallow supplementary grants during the ongoing financial year under the $3 billion Stand-by Arrangement (SBA).

In a significant development, the IMF has slapped a ban on supplementary grants for the current fiscal year in a bid to place very tight fiscal discipline.

A senior official of the Finance Division said the IMF disallowed supplementary grants till the next general election, but there would be no ban on technical supplementary grants (TSG).

There is a difference between supplementary grants (SG) and technical supplementary grants (TSG). The SG means there was no allocation in the budget, so additional demand is endorsed at the time of revision of the budget. The TSG stands for saving from one ministry and providing it to another one without increasing the size of the approved budget.

Practically, the budget approved by the parliament in June each year has little bearing on the way public monies are actually spent by the executive, at least with regard to the voted component of the budget. This is because of the extremely widespread use of supplementary appropriations by the executive during the budget year, without seeking prior approval of Parliament.

The executive argues that Article 84 of the Constitution empowers them to make such changes about the use of funds (re-appropriations from one area of expenditure to another, and supplementary appropriations which involve allocating funds to areas of expenditure not provided for in the budget e.g. new projects introduced during the budget year) without seeking prior approval from parliament. Only a small number of countries in the world allow their executive to spend money without prior approval from the parliament.

Experts argued that there has been a lot of discussion and disagreement about the appropriate interpretation of Article 84 of the Constitution, which relates to supplementary appropriation. However, the Supreme Court has indicated it does not accept that Article 84 should be interpreted as permitting appropriations, which have not received prior parliamentary approval. (2013 SC viewpoint on the case of Raja Pervaiz Ashraf).

The practice of the executive in spending without prior approval from parliament has two important negative impacts.

First, it undermines the basic principle in the Constitution that Parliament should have ultimate control and oversight over the federal budget.

Secondly, the practice of introducing new projects during the budget year has completely undermined the planning process. It is no exaggeration to say that the federal planning processes have been destroyed by the breakdown of budgetary discipline and the constant within-year changes to the budget.

Finally, in a situation where the approved budget is disregarded and subject to radical changes within the year, there can be no accountability for the delivery of projects and public services by the ministries/divisions of the federal government.

The root cause of the problem, which is undermining the legality of the budget arises from the prevailing political culture. It is considered acceptable to change and modify at will the budget which has been approved by parliament, and only notify parliament at the very end of the budget year through a set of tabled supplementary appropriations.