For
the fifth consecutive year the forthcoming budget would yet again disappoint
the people of Pakistan. It is not that the budget would contain some
anti-people measures but due to the fact that budget may not reduce the economic
miseries of an ordinary citizen at all.
Historically, people in Pakistan keenly wait for budget announcement. Any
change in tariffs, oil, petrol, diesel, gas and sugar prices, etc., would merit
a lengthy debate in the parliament forcing treasury benches to work hard to
defend their positions.
However, most of such issues are beyond the ambit of federal budget now.
Regulatory authorities such as National Electricity Power Regulation Authority
(NEPRA) and Oil and Gas Regulatory Authority (OGRA) are changing the energy
prices at their own will whereas commodity prices are being determined by
market forces. Thus, for many, budget is simply an irrelevant exercise.
On the other hand, it is indeed a tough time for PPP-led alliance government.
In the run up to next elections they are bound to take some populist decisions
for which they simply don’t have the economic cushion. In order to bring
macro-economic stability, they would have to take some candid decisions such as
withdrawal of subsidies of power sector which would further decrease their
popularity.
I am never a great fan of IMF, however, if the people of Pakistan are facing
such difficult economic situation then it would be better to adapt, in letter
and spirit, some of the conditions — or so-called home grown solution — of
IMF’s last stand by arrangement (SBA).
Bringing power sector reforms, restructuring state-owned enterprises,
documentation of economy through reformed general sales tax (RGST), and
conversion of non-targeted subsidies into targeted subsidies would have not
only brought macro-economic stability in the country but have also pleased the
IMF to whom we may have to contact for another SBA very soon.
Although some of the above-mentioned steps would have hit the common masses
badly, but the masses are, in any case, hit badly in the absence of these
measures. Moreover, achieving macro-economic stability seems to be a dream now.
Hence, to me ours is a classic lose-lose situation where both the people as
well as the government of Pakistan seem to be losers.
Budget preparation must have been a tough exercise, especially when in the
current fiscal year, almost all economic targets, including economic growth,
investment, savings, exports, imports, tax to GDP ratio, current account
deficit, inflation and fiscal deficit will be missed.
The total tax and non-tax revenue (for federal and provincial governments
combined) would form around 12.2 percent of our GDP whereas the total
expenditures (current and development expenditures combined for federal and
provincial governments) would hover around 20 percent of the GDP. This means a
fiscal deficit of around 8 percent which is double the target of 4 percent set
for this fiscal year.
The country is also facing current account deficit and balance of payment
problems. We have to pay 1.2 billion dollars to IMF as debt repayment. On top
of it the import of oil (which is consumed to produce 39 percent of our
electricity), edible oil, and fertilizer at increasingly increasing prices would
drain our foreign exchange reserve (FER).
One estimate says that from US$14.8 billion at the end of June 2010-11, the FER
would drop to US$10 billion by the end of current fiscal year. The current
account deficit may shoot up to $4.5 billion against an official forecast of
$1.4 billion. On top of these macro-economic indicators, our performance on
energy sector is extremely disappointing. The energy has not only turned
expensive but is simply not available, affecting all walks of life.
Ideally, the budget should take care of these imbalances. However,
looking at the priority areas of spending approved by National Economic Council
and the Annual Plan Coordination Committee, I am not very optimistic that a lot
would happen on renewable energy generation front; on change in energy mix; or
on supporting the sectors which are vital for enhancing our export and
contributing economic growth of Pakistan.
Public Sector Development Program (PSDP) is the main instrument to channelise
funds for socio-economic uplift of the country. Its stated objectives are
development of less developed regions and targeting pro-poor growth by
increasing employment and leveraging opportunities in rural and urban areas.
However, the way our development priorities are determined create many doubts
that PSDP would deliver.
In fact, PSDP is a medicine, policy makers are the physicians, and the
physicians after diagnosing the disease are not prescribing the right medicine
so the end result is more pain and agony for the patient (people of Pakistan)
waiting for some relief. This is not something peculiar to the current
government but a systemic problem that we as a nation are facing for the last
many decades.
Most of the approved schemes in the next year’s PSDP are for brick and mortar
expenditures rather than bringing any meaningful change. Let me quote the
priority areas for four vital ministries which if work in right direction can
change the destiny of Pakistan. I am talking of human rights, climate change,
food security, and petroleum and natural resources.
In order to improve the situation of human rights, rupees 30 million have been
allocated for construction of two working women hostels in Islamabad for
Ministry of Human Rights. There is a forecast of floods in the months of
monsoon but out of the 150 million rupees schemes from Ministry of Climate
Change there is no allocation for climate change adaptation. Rs. 200 million
would be spent to construct a Petroleum House out of the Rs. 235 million
schemes for Ministry of Petroleum and Natural Resources.
Despite the public announcement of Prime Minister to allocate funds for Zero
Hunger Program under which children in 45 most food insecure districts were to
be provided free lunch at public schools, and special ready to use nutritious
food supplements were to be distributed among breast feeding mothers and
pregnant women in these districts, there is no allocation for zero hunger
program in Ministry of Food Security’s PSDP.
So, this is how we would be working for pro-poor growth in election year. Like
always, the other three components of current account expenditure i.e.,
debt-repayment, defense, and day to day administration would take a lion’s
share and the fate of people of Pakistan would remain unchanged.
The federal budget may not provide any concrete answer to the plight of common
Pakistanis, but the minimum we expect from our rulers is an assurance that they
are learning from their mistakes and are ready to redefine their spending (and
revenue generation) priorities in favour of ordinary citizens. Budget speech
and budget session is a litmus test for political maturity of our elected
representatives.
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