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The budget not only sets a macro-economic direction but also provides reasons for hope and aspirations. Thus the budget document should be understood in letter and spirit by all stakeholders; especially those aspects that directly affect the general populace.
However, mainstreaming the citizenry during budget preparations is almost ignored.
Former US Fed chairman Ben Bernanke once said it is essential that the public understands the objectives and actions of a policy. Educating the public about the reasoning behind decisions helps build confidence in the economic system.
In a country where general literacy levels are below 60pc, talking of economic or financial literacy seems a task beyond the prevailing context.
Informed citizens not only pave the way for competitive markets but also force spurious products out of them
However, the competence to understand the impact of major policies is very crucial. There are three aspects of the present budget that the general public must understand and about which the government must educate its citizens if it truly wanted targets to be met.
These three aspects are the assets, debt and macro sides of the budget.
The asset side of the budget affects the decisions people make regarding savings and related matters such as savings accounts, financial assets like bonds and treasury bills and portfolio investments.
The savings target set in the current budget is at 14.6pc of GDP. Reaching this target might pose a serious challenge if there is no proper awareness amongst the citizenry about profitable and less risky investment avenues, financial assets and products available for savings. The general public knows even less about bonds like Sukuk.
Many options and contracts make it difficult for the public to make a choice. In addition to bonds there are many other financial products for portfolio investment like equities and stocks that people are unaware of.
This is the reason savings have not showed an encouraging growth, resulting in investment savings gaps. The government should therefore educate citizens about various competitive and relatively profitable savings products.
Then there is the debt issue. Pakistan borrowed around Rs972 billion in FY2016-2017 and is set to acquire another Rs 810.74bn in the upcoming fiscal year. The government borrowings are ultimately repaid by the citizens in the form of various taxes.
Domestic credit is an important factor of aggregate demand as it not only increases consumption but also enhances investment which, in turn, raises GDP. The government has set a GDP growth target at 6pc for FY2017-2018 while investment target for the same year is set as 17.2pc of GDP.
Inclusive and sustainable GDP growth is possible only when more citizens participate in economic activities in all sectors of economy. However, this will happen only when there is access to seed money in the shape of adequate credit facilities to establish or expand a business.
The Pakistan Poverty Alleviation Fund offers some credit facilities but has a limited outreach, borrower criteria and loan limit. A layman needs to understand and differentiate among a wide range of debt products. Unaware of intricacies of various loan facilities unaware borrowers end up paying a huge unexpected amount of interest.
What needs to be done? Firstly it is the responsibility of the government to educate the public about what it is going to do in the next fiscal year and how.
It should not only inform the public about major decisions and budget plans that affect people directly and indirectly but should also highlight the role of the citizens in implementing budget decisions and achieving fiscal targets.
In preparation and development of the budget the government can involve its citizens through civil society, labour and trade unions, human rights bodies, women’s organisations, academia, think tanks and media.
Secondly there should be pre- budget sessions at all provincial capitals and Islamabad with the purpose of broader consultations and to review decisions if needed. This will not only enable the general populace to have a say in the budget but also create a feeling of ownership of the decisions made therein.
For public awareness booklets in Urdu and major regional languages should be published and distributed for free.
—The writer is an assistant professor at the University of Sindh, Jamshoro
Published in Dawn, The Business and Finance Weekly, June 5th, 2017
