A haphazard budget

KARACHI: The government did not do its homework for the preparation of the budget and it was haphazardly done. It seemed like they did, not because it was their job as elected representatives of the people to help them, but only because they were expected to at the time and it was their responsibility to do so.

This is the government that has proposed cuts in subsidies and levied taxes on the common man and has the tenacity to increase the estimated expenditure of the President House and the Prime Minister Secretariat in the budget by a significant amount.

The estimated expenditure of the Presidency has increased by 14 per cent and that of Prime Minister Secretariat by 13 per cent. An amount of Rs931 million has been proposed for the two houses compared to Rs818 million for 2009-10.

The budget was not serious about the energy crisis which caused the country’s GDP to go down one per cent.

Leading economists and industrialists believe that the increased in labour charges cause all textile industries in the country to close up shot and cause massive unemployment. They believe it will be because there has been no relief announced to balance the increased labour charges.

No incentives to promote business activity or industrialisation were announced. The cost of doing business has been increased and local industries are fated to remain uncompetitive in the international market there is no clause in the budget help them decrease the cost of production.

Nothing was announced about the public sector enterprises that are hemorrhaging money and there are no proceeds from privatization envisaged in the budget.

The only thing that the government has done is tax services to generate more revenues without realising how it would affect the country, its economy and the inflationary impact on the common man.

The country would have easily fetched Rs300 billion from agriculture tax, Rss100 billion by eradicating under invoicing in external trade and Rs400 billion by checking corruption, Rs100 billion from a review of the Afghan transit trade agreement, Rs50 billion by checking smuggling.

The budget was made by keeping in mind the international commitments that Pakistan has made. So that it could meet the performance standards set in by the IMF as a condition for the $10.66 billion they are lending the country.

The introduction of much talked about VAT has been put off until October of this year and the interim period would be utilised with the provinces and building consensus with the stake holders.

The government plans to borrow enormous sums of money internally, from institutions within the country like banks. This internal borrowing will fuel inflation and the new tax along with the increase in General Sales Tax from 16 to 17 per cent will result in abnormal price increases.

In this context the 50 per cent raise in basic government salaries is extremely worrying. Provincial and local governments, autonomous bodies will also raise their employees’ salaries in the same manner, warranting even more taxpayer money.

The worst impact of this will be felt by the vast millions working under Pakistani ‘seths’ who will continue to receive a paltry salary. The unemployed skilled or even non skilled workers will continue to suffer from the heavy inflation persistently prevailing in the country.

This would create social and economic unrest in the country and vast unequal distribution of income in the country.

The budget with Rs133 billion additional taxes coupled with the curtailment of subsidies on various sectors from Rs229 billion to Rs126.7 billion would contribute to heavy inflationary pressure on consumers. This is the major reason that the International Monetary Fund and State Bank of Pakistan has forecast next year’s inflation rate as 12.5 and 12 per cent respectively. The government on the other hand forecasts next year’s inflation rate at 9.5 per cent.

Published in The Express Tribune, June 21^st, 2010.