BY now there are no significant secrets in respect of the budget proposals for 2005-06, likely to be presented on June 10. If that be the D- day that would leave barely a fortnight for the National Assembly to debate the budget and development plans, which is far from adequate for the purpose, if the fiscal package is to be taken seriously.

In terms of quantum of money that would be a landmark budget as the total expenditure would cross the trillion rupee mark at Rs1.05- Rs1.10 trillion, unlike Rs908 billion expenditure this year.

In terms of development plans too, the total outlay will be Rs272 billion, which is 34.7 per cent more than the current year’s figure of Rs202 billion. How well this money is spent and how the promised benefits would be ensured need to be discussed in detail and proper assurances obtained from the government.

It is to be hoped that the brief time available to the members of the Assembly would not be wasted by the ruling party provoking the opposition to walk out of the chamber over some dispute or another, or the opposition walking out in a huff over some trivial issue. The fundamental interest of the country or the people matter far more than passing disputes which come and go.

By now most of the changes to be brought about in the budget have been indicated by the ministers or CBR officials. In fact two major fiscal changes have been given effect already by the government, which is very unusual before the budget in Pakistan. The zero rating for sales tax of a dozen major inputs of the textile sector, including the polysynthetic fibre, has come into effect. Also announced is duty and withholding tax exemption on major kitchen items, like potatoes, onion, tomatoes and garlic along with Halal meat and live bovine animals from neighbouring countries, particularly India.

Reduction of the top rate of personal and corporate taxation from 35 per cent to 30 per cent has also seen indicated. Mr Ramzan Bhatti, Member, Central Board of Revenue has said the Central Excise duty would be done away with from all items save four including soft drinks.

There has been talk of reducing the general sales tax from 15 to 10 per cent. But there has been also talk of extending the GST to new areas, particularly the professions, which would raise a storm of protest from the vocal professionals.

In view of such official disclosures and significant tax relief already announced, and more in line expected with the informed speculation by the Press, the old cloak and dagger policy in respect of budget-making becomes non-essential, and we can do with less of the usual melodrama.

Should not the nation instead of waiting with bated breath for the budget hour, now be treated to the more relaxed US pattern of open-budgeting in tune with the times? The fiscal melodrama began with very high import duties in the 1960s. That made the trade policy which was then called the Import Policy too important or exciting for the traders who could make a large kill following minor changes in import policies. The import policy which is now called the ‘trade policy’, with its emphasis on exports altogether, has become far less important than before.

The same should be happening now to be budget as far as the people are concerned in view of the slashing of the import duties, step after large step, from five to 25 per cent from around 140 per cent once to protect out industries, particularly the textile sector.

In fact, we are moving towards almost doing away import duties on most goods from many countries or having on very low duties. This is how we are seeking ‘free trade’ agreements with many countries.

We are seeking FTA arrangements with Sri Lanka, Bangladesh, Thailand, Singapore, Malaysia and Indonesia in the East and with Iran and Turkey in the West, apart from the US. The SAARC countries, too, are proposing to make South Asia into a Free Trade Areas. Evidently, we are preferring larger exports, and the employment they promote, to larger revenues from restricted trade.

For those who regard the US style of budget presentation a model of open budgeting there is no blockbuster budget presentation at one go. Instead apart from the routine annual budget presentation listing the administrative expenditure of the government, there are requests from the president for additional allocations from time to time.

President Bush has been making a series of requests for allocation of funds for prosecuting the war in Iraq and Afghanistan. The latest this week is a request by him for 81 billion dollars for the war in Iraq and Afghanistan. Its approval has been sought from the key Congressmen even before the proposals were sent to the Congress.

What happens in Pakistan is the government goes on incurring additional or supplementary expenditure month after month and finally comes up with a request for supplementary grants, which are usually very large, after the new budget is passed. And members wanting to raise a discussion on the large extra expenditure are told that was money already spent and there was no use crying over spilt milk, though the simile does not hold as the large excess expenditure was not spilt by the government but actually spent by it wilfully.

In the new WTO world of international trade of intense competition, our exports have to be competitive in terms of prices and quality, and the deliveries have to be on time. And that means the government has to be ready to come up with tax incentives or monetary concessions all the time as needed. The exporters cannot be told to wait for the annual budget to come up with fiscal or monetary concessions or incentives.

In the post-textile quota world we have already begun losing our market share to China, India and Bangladesh. And that is only the beginning, with far more challenges to come over the years as the competition intensifies. Hence the government already placed 12 major inputs of the textile industry, concluding the poly synthetic fibre on zero rated sales tax. The government may have to take more such steps in course of time as the war for market share in textile escalates.

In the other key area of the economic sector, the monetary sector, we are making changes all the time. Interest rates are going up so as to fight inflation which is in the disturbing double digit region. So within a short time the interest on export refinance has come up from three to eight per cent and the rates for Pakistan Investment Bonds and the Treasury Bills are going up fast. The yield for three months treasury bills has gone up by 98 basis points at one go to 7.3798 per cent unexpectedly.

Such fiscal flexibility too on the part of the government is essential if the exports are to go up from the current year’s target of $13.6 billion or the revised $14 billion to $20 billion in four years as prime minister Shaukat Aziz wants. And that would need a soft budget that is very helpful.

The problems with Pakistan, as the exporters and investors find is the cost of production is high, the cost of doing business is high, the cost of transportation is high. All these have to be brought down, and labour made more productive, including through better management of factories. Along with that the infrastructure facilities have to be developed and industries enabled to receive as much power and water as they need.

Red tape on one hand and corruption on the other inflate the cost of production and slows down the industrial process. Too many holidays make the problems far worse.

Interest rates are going up in the hope that will rein the inflation, and hold the prices if not bring them down. That will add to the cost of production and doing business in Pakistan.

At a time when tax rates are low, the maximum of import duty on an average if 25 per cent, the optimum of corporate and personal taxation is to be 30 per cent, the government can afford to opt for the US style of open-budgeting and detailed scrutiny of the budget proposals before they are presented to the National Assembly. The present practice of voting on very large sums and development plans with an outlay of Rs272 billion within hours not minutes, is too anti-deluvian to be sustained for ever after 58 years.