• By: Mohisn UL Mulk

A budget is like a yearly financial plan that the government makes. It includes how much money the government will get from taxes and how it plans to spend that money.

Let’s break down what a budget is, its basic parts, and how we decide if it’s a good or bad budget.

Think of the government budget as a detailed money report. In Pakistan the finance minister shares this report with the parliament every June after the prime minister gives it the thumbs up. Then, parliament members discuss and suggest changes to the budget. Some ideas get approved, and some don’t.

Experts say there are three kinds of budgets. The first is the Union budget, which is from the federal government and not mixed with the state budget. The second is the state or provincial budget, where each state in a country with many states creates its own budget. The third is the supplementary or project budget made specifically for certain projects.

A budget mainly has two parts money coming in (revenue) and money going out (expenditure). It’s crucial for the government to give accurate info about how much money it has and how much it’s spending. This helps because the government needs to cover its costs and projects with the money it has, without going into too much debt.

There are three types of budgets based on how much money is left after everything is paid. A balanced budget is when the government’s income equals its spending. A deficit budget happens when the government can’t cover all its expenses with the money it has, so it needs to borrow. A surplus budget is rare in Pakistan, but it occurs when the government’s income is more than its expenses. This happened during the times of Prime Minister Liaquat Ali Khan and Zulfiqar Ali Bhutto.

Now, let’s talk about the key parts of the budget: revenue (money coming in) and expenditure (money going out). Taxes are the main way the government gets money. There are different types, like capital tax (on investments), corporate tax (on company profits), income tax (on individual earnings), tariff tax (on international trade), general sales tax (on everyday items), toll tax (on national highways), surcharge tax (used during severe money shortages), and Value Added Tax (VAT) on luxury items.

Creating a budget needs accurate info. Considerations include inflation (when prices of things keep going up), GDP (the total value of all goods and services a country produces), subsidies (money given to struggling sectors), and circular debt (money in the system but not with the government).In summary, understanding a budget means knowing what it is, its main parts, and considering important things like inflation, GDP, subsidies, and circular debt when making it.

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