The people and the government of Pakistan are going through troubled times and the forthcoming budget would be yet another manifestation of the same. The budget has lost its relevance for many people, who are more concerned about prices of electricity, gas, petroleum products and food items etc. None of these are part of the federal budget anymore. (Highly politicised) independent regulatory authorities determine energy prices, whereas prices of commodities are determined by (highly distorted) markets. Thus, the budget cannot address the problems of the masses. On the other hand, the PPP-led government is also losing its popularity due to the economic miseries being faced by the people of Pakistan. Hence, to me, ours is a classic lose-lose situation where both the people as well as the government of Pakistan seem to be net losers.
If the people of Pakistan were really meant to suffer, then it would have been better to implement the so-called ‘home grown agenda’ that Pakistan agreed with the IMF during the last Stand-By Agreement (SBA). Bringing about power sector reforms, restructuring state-owned enterprises, documentation of the economy through the reformed general sales tax and conversion of non-targeted subsidies into targeted subsidies would not only have brought macroeconomic stability in the country, but would also have pleased the IMF, whom we may have to contact for another SBA very soon.
Budget preparation in itself is an extremely tough exercise, especially when in the current fiscal year, almost all economic targets, including economic growth, investment, saving, exports, imports, tax to GDP ratio, current account deficit, inflation and fiscal deficit will not be met. Fiscal deficit for the current year would be around eight per cent, which is double the target of four per cent set for the period. The country is also facing a current account deficit and a balance of payments problem. In the wake of expensive import of oil, edible oil, fertilisers and repayment of $1.2 billion to the IMF, our foreign exchange reserve dropped from $14.8 billion at the end of June 2010-11 to $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. Moreover, our performance in the energy sector is extremely disappointing. Energy has not only become expensive but is simply not available and the existing energy mix is highly skewed towards thermal power, which may be a good option for the oil-rich Gulf countries but not for a cash-strapped Pakistan.
Ideally, the budget should take care of these imbalances. The Public Sector Development Program (PSDP) in the budget is the main instrument to channelise funds for the socioeconomic uplift of the country. In fact, the PSDP is a medicine, policymakers are the physicians and the prescribed medicine is simply not meant to treat our problem so the end result is more pain and agony for the patient (the people of Pakistan) waiting for some relief. This is not something peculiar to the current government only, but rather it is a systemic problem that we have been seeing for many decades.
Let us review the priority areas for four vital ministries: human rights, climate change, food security, and petroleum and natural resources.
In order to improve the situation of human rights, the total budget of Rs30 million would be spent on the construction of two hostels in Islamabad for working women. There is a forecast for floods during the monsoon but none of the Rs150 million schemes from the ministry of climate change cater to disaster preparedness. Further, Rs200 million would be spent on constructing a petroleum house out of the Rs235 million PSDP budget for the ministry of petroleum and natural resources. The Annual Plan Coordination Committee turned down the prime minister’s instructions to allocate funds for a Zero Hunger Programme, under which children in the 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.
This is how we are working for pro-poor growth in an election year. The federal budget may not provide any concrete answer to the plight of common Pakistanis either, but the minimum we expect in the run-up to the election is a commitment from political forces that the people’s agenda is close to their hearts.
Published in The Express Tribune, June 1st, 2012.
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