Functions of Budget:: Economic Function
Functions of Budget:: Economic Function
Functions of Budget:: Economic Function
provide are not subject to market competition as are those supplied by private businesses. While
in the private sector most organizations have profit maximization as their key goal, the public
sector’s main objective is to improve the welfare of the population.
A budget is an estimate of income and expenditure for a set period of time. It also reflects the
country’s social, economic, fiscal and financial responsibilities. It tells government’s future
policies for the country. It is also a starting point towards generating economic activities
throughout the fiscal year. The practice of presenting budgets and fiscal policies to parliament
was initiated by Sir Robert Walpole as Chancellor of the Exchequer of United Kingdom.
Functions of Budget:
In the public sector, budgets have three broad functions
Economic
Political
Legal
Economic Function
Economic, because they are an exercise of planning, controlling, and administering
activities, intended to balance revenues and expenditures, and to allocate available resources
efficiently in order to maximize social welfare. Budgets help officials to check if the flows of
revenues and expenditures during the fiscal period materialize as planned, and if operational
adjustments are necessary. At the end of the fiscal period, comparisons of budgets with
accounting final reports allow an evaluation of whether the flows of revenues and expenditures
were in accordance with expectations or not.
Political Function
The political function of the budget results from the fact that budget proposals offered by
the executive body of government have to be approved by committees that are usually elected.
Furthermore, during the implementation of the budget and at the end of the fiscal period,
officials have to present reports that require approval by legislative bodies.
Legal Function:
Finally, since budgets are regulated by laws, rules and regulations and, in some cases,
they have a legal status; they carry out a legal function. They establish limits to managerial
decisions and actions of governments, and officials violating them may be subject to penalties.
Budget Cycle
Public budgeting varies considerably across the world. It depends on the countries legal
framework, as well as on the organizational structure of government. The budgeting process
involves interaction among numerous participants, from citizens to firms, and includes officials
from various levels of government. Although budgets are usually set for a fiscal year, the
budgeting process extends for a considerably longer period and is best understood as a cycle with
overlapping phases, as
Four key general phases of the budgeting system can be identified.
•Committees review and scrutinize budget & revenue proposals and report to the full legislature
Year-end reports submitted to the Supreme Audit Institution (SAI) (Auditor General of
Pakistan)
SAI conducts audits of spending agencies
SAI prepares audit reports and submits reports to legislature.
National/State legislatures submit reports to the Public Accounts Committee (PAC)
PAC makes recommendations to the full legislature about the SAI’s findings
THE FEDERAL BUDGET PROCESS AT A GLANCE
Ministries/Divisions/Departments
NOVEMBER
Development Requirement To
FEBRUARY
Ministry of Finance
JUNE
INCLUSION IN BUDGETARY PROPOSALS
References:
The budget process in Pakistan Mirza Tauseef
http://iportal.riphah.edu.pk/?s=Budget%20process
https://arynews.tv/en/explainer-the-budget-making-process-in-pakistan/
Budgeting Process in Pakistan-I Written by: Muhammad Ramzan on July 5, 2014
http://jworldtimes.com/jwt2015/magazine-archives/jwt-2014/july2014/budgeting-process-in-
pakistan-i/
The federal budget process in Pakistan
http://siteresources.worldbank.org/PAKISTANEXTN/Resources/pdf-Files-in-Events/Federal-Budget-
Process/FBPinPakistan.pdf