Dar’s 2013 budget speech – the highs and the very low lows

Published: May 25, 2014

Our government will build an economy that is not dependent on others except through trade and investment, and based on competitive advantage and market considerations, Ishaq Dar stated during his budget speech. PHOTO: ZAFAR ASLAM/EXPRESS

ISLAMABAD: 

It would not be an understatement to call the economy a weakened one when the Pakistan Muslim League-N government came into power. It, however, managed to arrest the decline and instill confidence among unnerving investors and international financial institutions.

Its short-term stabilisation measures largely focused on improving stakeholders’ perception but the government fell short of taking much needed drastic reforms that its economic czar had announced in his maiden budget speech delivered on June 12, 2013.

Exchange rate stabilisation, auction of next-generation spectrums and floatation of Euro bonds are among the notable achievements of the government. But none of these measures can be considered as reforms as all of them were administrative decisions like the power tariff increase, which is also wrongly portrayed as an energy-sector reform.

Promises that Ishaq Dar made with the nation were rooted in the party manifesto, but some lacked substance like any other manuscript that is offered to lure voters.

Review of the budget speech

A critical review of the finance minister’s speech gives an idea where the government stands and what it could have done to achieve the six goals that Dar set for his government at the floor of the National Assembly.

“My enthusiasm is seriously dampened as I discover that the new government is inheriting a broken economy,” he had said while reading out what seemed an indictment of the Pakistan Peoples Party government. Dar had then highlighted the failures of the previous government — ranging from economic growth to prices, revenues to expenditure, public debt to circular debt, monetary expansion to interest rates, exchange rate to forex reserves and sustainability of balance of payments.

He blamed his predecessors for leaving the economy on autopilot.

Goal I

Dar had said his government would “build an economy that is not dependent on others except through trade and investment, based on competitive advantage and market considerations.”

Twelve months down the line, it appears that the government worked to the contrary. The economy’s reliance on foreign powers has increased significantly.

The government proudly received $1.5 billion as a ‘gift’ from Saudi Arabia. The target to increase investment-to-GDP ratio to 15.1% has been missed. Economic growth target of 4.4% has been missed.

On the international trade front, the government could not normalise trade ties with India despite agreeing on the March 31 deadline. On the back of spadework done by the PPP government, the country availed the duty free access to the European Union. But the PML-N government could not win trade concessions from the US.

Goal II and III

“The private sector has to be the lynchpin of economic activities, shouldering the largest burden of economic functions. The only areas where government’s presence in economic affairs can be justified are where investments are too large for private sector to undertake”.

The government has made attempts to reduce its footprint but a lot more is desirable. It has set a privatisation agenda, which it is trying to achieve by moving forward very carefully. However, enabling reforms that would bring the private sector to the driver’s seat have not yet been initiated. No efforts are being made to decrease red-tape issues. The private sector is reluctant and most deals are done on a government-to-government basis.

Goal IV

“All segments of the population must share the burden of resource mobilisation for running the government. The culture of exemptions and concessions must end to build a self-reliant economy”.

This is an area where the government has failed most miserably. It cannot count even a single effort that it made to make the tax system more equitable. Instead, the hands of the industrialists and traders have been strengthened further during the last one year. It has accepted 26 demands of the business community after the budget. No tax exemption was withdrawn in the last one year.

Goal V

“The government must limit itself within the broader limits imposed by the available resources, primarily determined by revenues collected through different taxes”.

On the face of it, the government is going to achieve this year’s budget deficit target of 5.8% of the budget. But this is coming on the back of a drastic cut in development expenditures, as the current spending remains above limits. It will surely miss the tax collection target of Rs2.475 trillion that shows its inability to broaden the tax net and improve the performance of the tax machinery. It has also missed the target of mobilising savings.

Goal VI

“We have to protect our weak and poor segments of population. People of this country are our real strength”.

The government kept intact the Benazir Income Support Programme and also increased its monthly stipend by 20%. It also protected the low-income group from the impacts of increases in electricity prices and is bearing the subsidy cost.

However, no serious efforts were made to create job opportunities. It placed a ban on new hiring.  Dar had announced the three-Marla housing scheme for the homeless and promised to give away plots free of cost. There is no progress on the issue yet.

Published in The Express Tribune, May 26th, 2014.

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Reader Comments (10)

  • reason
    May 25, 2014 - 10:04PM

    How can you talk of increasing tax revenues and also reducing the government’s role in the economy? The two are contrary objectives. If you increase tax revenue that means money is being taken from the efficient private sector and given to the inefficient public sector. The govt. will have more money to spend and it will spend it by increasing its role in the economy. It will launch new departments, new projects, and new rules and regulations that will further stifle private sector businesses.

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  • rap47
    May 25, 2014 - 10:16PM

    How has law and order gone down. ET have you compared statistics with PPP tenure ?

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  • Parvez
    May 25, 2014 - 10:31PM

    ….but the dreaded SRO regime that supports the corrupt and he promised to do away with is still there………proving that same-old-same-old still reigns supreme.

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  • Usman
    May 25, 2014 - 11:38PM

    A bit harsh…agreed that the government missed some of its targets…including the taxation one…but expecting everything to improve in one year after 5 years of sheer incompetence is also unreasonable.

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  • broker
    May 26, 2014 - 1:47AM

    @ Usman
    Agree that 12 months after 5 years (I would say decades) of “incompetence” is not enough to judge but a year is more than enough to share, define and put to action policy framework. I would be critical of this government as it promised swift action by thr experienced team against Pti’s leadership that, in thr view, lacked experience.

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  • Imran
    May 26, 2014 - 10:33AM

    Present Government has no contribution towards attaining GSP status, neither any benefit has been drawn from it. Funny how government is so eager to put everything on its credit

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  • Timorlane
    May 26, 2014 - 10:59AM

    this guy has no qualms spending Rs. 220 million on purchase of two BMWs for the royal entourage of nawaz sharif. This is not democracy but royalty

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  • Hamza
    May 26, 2014 - 12:39PM

    Everything takes time. To fix 90% of the problems, as you want it, it will take atleast two terms, not just a few months as you wish. Plus there was as much good as there was bad. Loadshedding is much less than last year, tax target was missed but the tax net did grow substantially. Do not discourage someone doing right just because you do not support them. Be thankful you got rid of the wrath of PPPP.

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  • i4shad
    May 26, 2014 - 2:21PM

    I agree with Hamza. NS seems to be doing the right things. His priorities are security, electricity and economy. None of these could be fixed in months. Overall I’d say there’s more good news than bad and hppefully their focus and mmomentum will continue…

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  • unbelievable
    May 26, 2014 - 4:59PM

    You know your in sad shape when your high point is borrowing money and selling assets.

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