ISLAMABAD: Prime Minister Yousuf Raza Gilani and his cabinet colleagues are not satisfied with the contours of next year’s budget as prepared by the country’s economic managers. They say the draft budget lacks public welfare initiatives, particularly in the areas of energy and employment generation.
A government official told Dawn that it was because of this reason that the cabinet did not approve a budget strategy paper presented by the ministry of finance during a recent meeting.
He said the prime minister directed Finance Minister Dr Abdul Hafeez Shaikh and his team to hold talks with key federal ministers and prominent members of parties in the ruling coalition to listen to their points of view on the matter and then call a cabinet meeting with the single-point agenda of hammering out budgetary proposals.
The finance ministry team was expected to meet key ministers and important political leaders this week for their inputs on the subject. However, the consultative process had to be delayed for a few days owing to Mr Shaikh’s engagements in the United States with lending partners and the Obama administration officials for financial support and disbursement of the Coalition Support Fund (CSF).
Sources said the ministers from the MQM and PML-Q were particularly critical of the way the process of budget formulation was handled by the finance minister because in their view they could have given constructive suggestions for easing the suffering of the people but they were never consulted.
And as if this was not enough, some PPP ministers expressed annoyance over the fact that it was the last budget of the sitting PPP government but there was nothing in it that could attract the voters. More importantly, they said, the people were getting fed up with the electricity and gas shortages but the budget paper did not offer any strategy to deal with the
crisis or resolve the problem of circular debt.
The PPP ministers also criticised the lack of initiatives vis-à-vis employment generation.
The PPP ministers told the prime minister that they could defend the high commodity prices by linking these with last year’s flood and hike in oil prices in the international market, said the official. But they could simply not go to their constituencies at times when there were electricity and gas outages there.
Therefore, the government should not hesitate in easing the shortages even if it required borrowing from the State Bank and commercial banks to ensure regular supply of fuel.
While attempts to contact finance ministry spokesman Rana Asad Amin for comments on the matter ended in failure, a cabinet member told Dawn that the finance ministry’s presentation to the cabinet focused on broad financial allocations for different sectors and their revenue sources. The presentation did not touch on economic policies that could
address key public interests.
The finance minister has, however, repeatedly stated that the budget would not compromise on fiscal responsibility and economic prudence for popular temptations and hence the limited resources required the policy-makers to continue with austerity and expenditure management to win international integrity and support.
Mr Shaikh is reported to have told the political leadership that higher international oil prices, slowdown in external flows, delays in CSF disbursement, delays in auction of 3G telecom licences, non-recovery of PTCL proceeds and power and food subsidies were some of the key risks to the financial position, leaving little room for a popular budget.
Moreover, the increase in grants to loss-making public sector entities, worsening of the Eurozone crisis and low provincial cash surpluses also had adverse implications for current account and fiscal deficits.
Therefore, the people should not be burdened with higher inflation through monetisation of fuel supplies and subsidies and instead focus should be on tax policy and tax administration reforms to mobilise domestic resources.
He advocated fiscal austerity, consolidation of special programmes and strengthening of social protection like People’s Works Programme and Benazir Income Support Programme (BISP) for balancing regional development.
Also, the government should now focus on elimination of discriminatory tax exemptions, accelerate restructuring of public sector enterprises and working with provinces for improvement financial discipline while overcoming energy and infrastructure development.
The budget strategy paper had also called for rationalisation of ministries and review of pay structures by further monetisation of perks and privileges and rationalisation of food commodity operations. It was, however, a different case that instead of rationalisation of ministries, the prime minister inducted 15 new ministers in the cabinet.
