Budgeting for 2010-11

Published: June 6, 2010

There is much that we disagree with what Finance Minister Dr Abdul Hafeez Sheikh said during his budget speech on the floor of the National Assembly on June 5. Defending the substantial rise in defence expenditures, from Rs378 billion last year to Rs442 billion for 2010-11 (an increase of almost 17 per cent), the minister said that security was the government’s “topmost” issue. While that indeed may be the case to an extent, given Pakistan’s participation in the war on terror and the massive impact its fallout has had on the people of Pakistan and the economy, the fact is that there is more to this debate. For instance, over the past five years or so, governments have spent a mere 0.5-0.6 per cent on health and just two per cent on education. In any case, given that debt servicing for 2010-11 — like last year — will be almost double the defence budget allocation, one can well understand the heavy burden of debt that hangs over all of us like a millstone.

For a country which ranks so badly on the UNDP’s Human Development Index, this kind of neglect and failure to increase allocations on both education and health borders on the criminal. Besides, while security may be the government’s “topmost” priority, what good is security if the people are impoverished, don’t have enough to eat, are diseased and illiterate? Surely, a more educated and healthier population translates into a more productive workforce and that in turn means more potential for growth. One can only hope that the increase will be directed towards strengthening the military’s counter-insurgency capability because that is crucial to winning the war against militancy.

Moving on, instead of cutting down on the cost of running itself, the government has further increased it, by pledging an increase of 35-50 per cent in the basic pay of all federal government employees. Some measures are more salutary and need to be applauded, in particular the proposal to levy a tax of one rupee per cigarette. This is likely to be fought tooth and nail by the tobacco lobby but the government would do well to resist it and implement it. As for the much-heralded and debated Value Added Tax, its implementation has been delayed till Oct 1 of this year, though the minister did say — and commendably so — that collecting tax on services was the right of the provinces as agreed upon under the Seventh National Finance Commission award and that the centre intended to respect that. A tax of 10 per cent has been proposed on air-conditioners and refrigerators, the rationale being that they use a lot of electricity.

The minister claimed that the budget deficit would be brought down to four percent of GDP in 2010-11. However, given that the State Bank had said that for the outgoing fiscal year it would be around 5.6 per cent of GDP, the intended reductions for 2010-11 seems more like wishful thinking. In this regard, a pay cut of 10 per cent for ministers may seem well-intentioned but is hardly going to have any impact on reducing non-development expenditure. However, one good proposal is that the government intends to cut subsidies to PIA and Pakistan Steel, both organisations that have for years been relying on handouts from the government. Hopefully, this may force them to bring about some much-needed financial discipline. The minister said that the government wanted subsidies that targeted the poor and so the allocation for the Benazir Income Support Programme would be increased. However, we urge the government to make the disbursement process transparent since if misused its very purpose will be defeated. The main tool of the government for improving the quality of life and standard of living for the population in general is social sector spending as contained in its public sector development programme. For 2010-11, this will rise only marginally, from Rs646b billion during 2009-10 to Rs663 billion for the next fiscal year. This means that it is likely that there will not be many new schemes in this regard. Clearly, that will not be good news for the majority of Pakistanis.

Published in the Express Tribune, June 6th, 2010.

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Reader Comments (5)

  • Jun 6, 2010 - 1:41AM

    The 35%-50% increase in government servants pay is only going to add to inflationary pressure. While a rise was justified, especially for those employed in the lower grades – this sets a very dangerous precedent. By increasing wages in line or above the rate of inflation, in the coming years, any increase in inflation will be met with demands to raise wages.

    Those on the government pay roll would better serve their own and the national long term interest if they propose to rationalise the proposed package. Instead of a 50% increase at the higher grades, which smells of a pay off – the state should instead divert the funds towards supply side measures which would help to contain inflation. Rather than adding to the money supply and encouraging consumption, the government should have ploughed funds into measures towards efficiency savings in energy supply and production, transport etc to minimize costs and reduce inflation.

    In doing so not only would civil servants be able to enjoy more bang for their buck, lower inflation would have helped benefit the whole nation.

    The government is literally giving itself a pay rise, while recipients of the BISP have been receiving Rs. 1000 a month since its onset. Recommend

  • Jun 6, 2010 - 4:08AM

    Sorry – 35% increase at higher gradesRecommend

  • Sharjeel Jawaid
    Jun 6, 2010 - 2:07PM

    The Budget does not appear to be common man friendly. We would see higher inflation and cost of living going further up.

    Higher taxes mean higher tax evasion and increasing corruption. Let us brace ourselves! The corruption rate [though known, but never mentioned] has been spiralling upwards with every budget since 1959. Then, the Martial Law rates were introduced; higher risk, higher rates. It is common knowledge that 30 to 60 % of revenues are siphoned off from government expenses. If the tax collection is genuine we can safely double our revenues without additional taxation, doing away with IMF and debt calls.

    A fundamental concept has been ignored which revolves around increasing direct taxes and reducing indirect tax. We may not be realizing that we may already be among the highest taxed citizens in the world. Just take a close look at the utility and mobile bills. Not to mention the share of goverment levies on items of day to day use including petrolelum product.

    Additionally it may be prudent to do away with exemptions. No earning member of the society should be exempted from registering himself from paying income tax. Let the PKR 100,000/- slab pay PKR 100/- per year while the payment could be PKR 500/- for the 200k slab and PKR 1000/- for the 300k slab.Recommend

  • Syed A. Mateen
    Jun 6, 2010 - 7:09PM

    I am shocked and disappointed and could not even think and imagine that the government will present such a budget which will provide no relief to the middle class and poor people of Pakistan.

    Pakistan is lacking in hiring competitive economic managers. Either Pakistan import economic managers from abroad or hire some one who was sitting ideal and has nothing to do.

    It is pathetic that while PPP government took over from General Pervez Musharraf, government wanted to induct Ishaq Dar as Federal Finance Minister, but as PML(N) could not come in line with the PPP government, the sitting government did not have any option to induct Naveed Qamar.

    He also could not run the show therefore government hired the services of Mr. Shaukat Tareen.

    He also proved to be a complete failure and resigned to take over the Silk Bank. Now government hired the services of Dr. Abdul Hafeez Shaikh who previous served as Minister for Finance, Planning and Development in Government of Sindh.

    Then Dr. Abdul Hafeez Shaikh got promoted during the rule of General (R) Pervez Musharraf and became Federal Minister for Privatization & Investment.

    During Dr. Abdul Hafeez Shaikh’s tenure, KESC and PTCL were privatized. Neither KESC could end the load shedding in Karachi, nor PTCL proved to be worthy as till date if some one ask inquiry 1217, the subscriber has to call number of times to get the correct telephone number either of a person or a company.

    Pakistan has it own problems which even Mr. Shaukat Aziz who served as Federal Minister for Finance during General (R) Pervez regime and then as Prime Minister of Pakistan could not understand how to make the country economically viable.

    The imported Finance Ministers of Pakistan are good in taking loans from the World Bank and IMF for the government but on the other hand when ever they leave or complete the tenure, they leave the country in financial mess.

    Is it evident that population of the country is growing with the passage of time but our economic managers are not capable to make the country economically viable?

    Due to low literacy rate in the country, people time and again elect high profile, politically influential, heavy weight foreign degree holders who instead of making the country economically viable, take loans from the World Bank and the IMF by saying that they are taking loan in interest of the country in order to save the country from economic default.

    No Economic Manager of Pakistan has ever made answerable to the people to explain that what he has done with the money taken by the World Bank or IMF.

    If a patient die due to illness, people say that it was the will of Al-Mighty Allah, but if the same patient survive and return home happily, people say that the Doctor who treated the patient was very good.

    But in case of Pakistan’s economy, we do not require Doctor-Minister’s to treat the ailing economy. Even a simple B.Com understands that what actual problem with the economy of the county is.

    Now after delivering the 2010-2011 Federal Budget which has been totally refused by the people of Pakistan, I am sure that by now Dr. Abdul Hafeez Shaikh must be having namak-paras and samosas to enjoy the rainy season.Recommend

  • muhammed ashraf gandhi
    Jun 7, 2010 - 8:51AM

    budget reflects gvt intention to safe gaurd the rich at trhe cost of poor.the govt. has come out with a plan to tax the sectors which r not contributing the gdp also the taxable income of the waderas zamidars and malaks has not been brought into the net. nor the rise in theminimum wage of the unskilled worker has been increased as rs. 7000 had been announced earlier. if the govt. servants salary has been increased why not for the poors in the private sectors. the govt. should moniter that the employers atleast pay rs.7000 to the unskilled workers. the industries r still not paying even rs. 6000 to its employees. this should be checked rather than giving an opportunity to the workers to come on the roads. although the speech of the f.m. was loaded with boutiques it had nothing for the common man.no solution has declared for white elephants nor nothing has been said of the circula debt.Recommend

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