Populist to some extent: Budget 2012-13

The new budget has something for everyone, except the opposition in the parliament and the government waiting outside the parliament. The latter, of course, will have to deal with the unusually high fiscal and current account deficits, inflation and public debt. Traditionally, the budget has two sides — revenue and expenditure. The budget 2012-13 is only about expenditure. No revenue mobilisation measures have been announced. Nor is there any prospect of the FBR suddenly transforming itself into a super efficient machine yielding a full extra percentage point of GDP in revenue.

Expenditure is what counts in an election year. There are around 81 million voters, majority of them in rural areas. Of the total employed labour force in the country, 45 per cent is in agriculture. This is where the ruling elite perceives its main strength lies. No more a federal subject, but the budget continues the schemes benefiting the agriculture sector. Subsidy to TCP for import of urea fertiliser, crops loan insurance and Benazir Tractor Support Programme get Rs28.5 billion. Development expenditure of the new Ministry of National Food Security and Research and other ministries on agriculture related programmes and projects will increase the total allocation for agriculture to Rs30 billion. Water sector gets Rs48 billion, an increase of 30 per cent compared to 18 per cent for energy.

In the current expenditure, the major beneficiaries have been and continue to be the government servants, retired and serving. In the past four years, their pays and pensions have been increased by over 100 per cent. This budget adds another 20 per cent. After interest payments and the defence allocation, the current budget left for the civil affairs is only 38 per cent of the total. Out of this, about one-third will be spent on pays and pensions this year. The number of beneficiaries in this case is around 2 million. Provinces will have to follow suit. Addition of defence forces and the provincial government employees would increase the number of beneficiaries to a little over 5 million.

Benazir Income Support Progamme has been allocated a hefty Rs70 billion, 40 per cent more than last year. In addition, an amount of Rs15 billion has been earmarked for relief and rehabilitation of IDPs and compensation for flood damages. All told, these programmes will put cash in the pockets of 5 million poorest of the poor. Pakistan’s Baitul Mal will also be used for similar purposes. There is not much that the federal government can do for the working class in urban areas through the budget. However, the announcement of increased minimum wage and pension and other benefits under Employees’ Old-Age Benefits Institution (EOBI) are designed to win the sympathy of the working class. Around Rs15 billion to be disbursed by EOBI will benefit over 400,000 workers. Among the unemployed, 2.4 million are youth. Those in the voting age will be targeted through the internship schemes and Rs27 billion allocated for the Peoples Works Programmes.

The efficiency shown in the release of funds in the current year suggests that most spending will be front-loaded. If the intention to do whatever it takes to clear circular debt and spring a surprise over loadshedding just before the elections means anything, the fiscal deficit, already high at 7.4 per cent in 2011-12, is likely to beat all records in 2012-13.

Published In The Express Tribune, June 7^th, 2012.