Will the budget promises be realised?
By Sultan Ahmad
WHAT we have for 2006-07 is a true election year budget. President Pervez Musharraf and Prime Minister Shaukat Aziz have been making no bones about it in its preparation stage. They have been indicating in their statements that the budget is designed to win the 2007 elections, presidential as well as legislative.
The strategy is to give as much relief as possible to common people using the least possible amount of money and the effort is to win over as many large groups as possible and get their votes.
And in a year of high economic growth and higher tax revenues exceeding the projections it is easier to give several tax reliefs and additional concessions as the situation demands. But while the government reports an economic growth rate of 6.6 per cent in the current year, the Economic Survey released by the government says the growth rate of the developing countries in the current year is 8.6 per cent while it was 8.8 percent last year. China’s rate is 9.9 per cent, following deceleration of its growth to prevent overheating of the economy. The world GDP growth, the survey says, is 4.8 per cent
Although minister of state for finance Omer Ayub Khan, who presented the budget, did not mention the amount of foreign aid which was expected and instead repeatedly said that the “Kashkol” (begging bowl) has been smashed forever (as did Nawaz Sharif when he was prime minister), the fact remains that plenty of aid and other forms of external assistance will be available during the next financial year, beginning with the $6.5 billion package from the World Bank for the next 5 years. The Asian Development Bank is to give $4 billion for a two or three year programme. Japan is resuming its Yen loan of $500 million, which was suspended following 1998 nuclear tests, from the next financial year. Add to that the US aid of around $500 million.
Foreign investment expected next year, including the privatization proceeds are $4 billion and the anticipated inflow of remittances is $4 billion which will greatly negate the external account deficit of the same amount.
A part of the earthquake relief and reconstruction fund commitments of $6.2 billion will also be available next year. The government has earmarked Rs50 billion for the next year’s reconstruction work. Dubai’s ruling family has chosen Pakistan as their favourite country for investment and has many plans in this respect after PTCL and United Bank. As a result investment in Pakistan has risen to a record level of 20 per cent of the GDP from 17-18 per cent while the national savings is only 14.6 per cent of the GDP. The balance is made up by foreign investment. The rise in investment is a healthy sign and everything possible should be done to step it up.
The government has tried to help its employees and pensioners who may total about 6 to 7 million. It has raised the dearness allowance by 15 per cent and the pension for those who retired before 1977 on low pension has been raised by 20 per cent and that of those who retired after that by 15 per cent. But the issue is not only of raising the pension rates but paying them in time and not long after their agonising death, as the Sindh High court has observed. There is excessive corruption and lethargy in the pension departments which needs to be stamped out firmly. And to please a large number of workers in the private sector, their minimum wage has been raised from Rs3,000 to Rs4, 000. A number of other concessions have been given to government employees including those who die while on duty, for their daughters during their marriage and employment for sons of the deceased employees for two years.
Will the increase in the emoluments of the government employees result in raising efficiency of the government departments and reduce the red tape? Such increases in the past, one may recall, did not lead to any improvement in the working of the departments.
The defence budget has been raised by Rs25 billion to a total of Rs250 billion and Rs415 million has been earmarked for the Public Sector Development programme with its mega projects. Education has received considerable attention from the government. The teachers are to get an allowance of Rs500 to Rs1,000 according to their qualification. In case of death of a government employee a one-time grant has been raised from two lakhs rupees to one million according to the grade.
Profits of all savings schemes and prize bonds have been raised by 0.5 per cent to 1.5 per cent.
Following a fall in the growth of agriculture this year to 2.5 per cent from 6.7 per cent last year, the government is giving considerable attention to the sector and is allocating Rs22.259 billion for its expansion. The assistance will cover the food sector, forestry, fisheries and livestock and diary sector. Rs2.5 billion has been allocated for research, but most of this money will be spent on salaries and too little on research. One billion rupees is to be spent on poultry and Rs5 billion on subsidised fertilisers which will enable the stores to sell a bag of fertilisers at Rs500 instead of Rs 1000.
One billion rupees will be spent on drip irrigation along with sprinklers and sales tax on diary projects has been abolished. Livestock and diary farm development are to receive Rs3.6 billion. Tax on equipment for fisheries is to be reduced to five per cent and customs duty on refrigerated vans has been brought down from 60 per cent to 30 per cent.
No major structural change is to be brought in the land owning system although the World Bank has been advocating distribution of land to the tillers of the soil. In recent times suggestions have been made for awarding surplus government land to the tillers. The government is not anxious to act quickly on such recommendations. The question now is how to make the vast spending on agriculture effective and productive. In rural areas, official oversight is slack and waste is too common.
Do the intended beneficiaries get the funds and the technical assistance? New technologies can be wasted on them unless well guided and vigilantly assisted. In these good times for the rich and the enterprising, a good many initiatives could have been taken by the Central Board of Revenue to earn more revenues from the affluent. But only modest measures have been taken to raise an additional Rs25 billion as tax. Out of that Rs14 billion more is to come from sales tax and Rs10.8 billion more as income tax.
A two per cent capital value tax has been levied on real estate although it can afford to pay a far larger amount, but overnight millionaires in this sector have been spared.
The governments honeymoon with the computer appears to be coming to an end as sales tax has been levied on the computer hardware.
Mr Shaukat Aziz has unfolded partly his vision of a far improved supply system. He wants to double the number of utility stores in the country and also begin mobile stores scheme in addition to starting a bank-sponsored programme to launch the utility stores franchises in the private sector. He wants price magistrates to be appointed and have more than one magistrate in a district to ensure fair prices.
We have been told that the defence budget would be discussed. It is not clear whether the standing committee on defence would discuss it or the parliament itself. But as the defence budget keeps on expanding, it has become imperative for the public representatives to examine it and express their views.
The final piece of the election winning strategy is the employment programme which is being initiated next month and which would focus on self-employment, benefiting some two million people over the next four years.
While some of the concepts outlined are good in principle, it has to be seen how well they are implemented and how much the masses truly benefit from that and the Rs109 billion earmarked for relief and subsidies.

