Budget cuts

Unless cutbacks affect officials and bureaucrats, it is unreasonable of the govt to ask citizens to pay more taxes.

Perhaps somewhat belatedly, the government has decided to reduce its budget by as much as Rs300 billion, which represents 9.1 per cent of the combined federal and provincial fiscal outlays. This newspaper has consistently asked the government to put itself on a fiscal diet, as a measure of good faith, before asking the public to pay more in taxes. It is welcome to note that the government seems to be willing to take tangible efforts on that front. In the aftermath of the flood, it makes sense for the government to divert at least some part of the development expenditure towards reconstruction efforts. There are, of course, risks to this course of action, not least of which is the economic slowdown that is to be expected from reducing development outlays. Having said that, there is a strong case to be made for prioritising reconstruction over further development, especially given the scale of devastation.

Much of the revised budget relies on the imposition of new taxes as well as a revised mechanism for the sales tax. The finance secretary, Salman Siddique, has made it clear that if the government fails to gain parliamentary support for the newer taxes, it will reduce its own expenditures. This is the right approach and we applaud the finance ministry for stating the policy clearly.

Yet the revised budget is not entirely without its failings. Development, for instance, seems to be the only segment of the budget that has been cut. There has been no attempt by the finance ministry to reduce the operating budgets of what is described by many economists as a bloated government machinery. It seems that the finance ministry stands ready to sacrifice, so long as the budgetary privileges of bureaucrats and politicians remain intact. While there is a baseline below which it is difficult to cut government expenditure without reducing services, most economists seem to agree that the government of Pakistan is nowhere near that level.

Unless the cutbacks are visibly affecting both elected officials as well as senior bureaucrats, it seems unreasonable of the government to ask the citizenry to pay more taxes, such as the flood tax currently being contemplated. While we applaud the current effort to reduce government spending, more clearly needs to be done.

Published in The Express Tribune, November 17^th, 2010.