Budget 2018-19: Populist overtones

Advisor to the PM Miftah Ismail took oath as Finance Minister a few hours before presenting budget for 2018-19 in the National Assembly to give credence to the budget. But the government was criticized for elevating an unelected advisor as minister. Anyhow, it was an election budget with populist overtones; and figures appear to have been fudged for showing respectable economic growth. Anyhow, gross Federal Revenue is 5,660. 5 bn and after allocating provincial share in the revenue the net federal revenue is 3,070.4 bn. Tax revenue is Rs. 4,435 bn, other taxes are Rs. 453. 6 bn and Non-Tax revenue is Rs. 771. 9bn. Total Expenditure is projected as Rs. 5,246.2 bn, and after taking into consideration provincial surplus of Rs. 285.6 bn, the deficit is Rs. 1,892. 2bn. Provision for debt servicing is Rs. 1,620.2bn, for Defence Rs. 1,100.3bn and others Rs. 1,458 bn, whereas only a sum of Rs. 800 has been allocated for PSDP. However, education and health remain neglected orphens, as inadequate provisions have been made for those sectors.
There is a lot of controversy that the PML-N government will complete its tenure on 31st May 2018, and morally it was not right to present budget for the next 12 months when it has only 34 days left. Howeveer, the budget for fiscal 2018-19 was announced on Friday, revealing a strategy of the PML-N giving incentives to business and also reducing tax burden on common man by increasing the limit of taxable income. Now those earning Rs. 1200000 will be exempt from payment of income tax, and tax has been reduced on other slabs. It is indeed an effort to please everyone since elections are only a few months away. At the same time, instead of giving priority to development, the focus is on current spending. There is a perception that PML-N government has been generous in giving relief to common man and business, which will create problems for the incoming government after elections. Budget is indeed a part of planning process, and is also described as a statement of intentions of the government. Its success depends on the extent to which it has improved the living conditions of the people. Given the image problem and poor governance, it would be a tall order. However, all concepts of political sovereignty and national sovereignty are fictitious if the economy is not strong and stable and free from heavy dependence on foreign assistance. There is another flaw in the economic policy that needs to be removed. Out of tax revenue, Pakistan collects 33 per cent from direct tax like Income Tax and 66 per cent from indirect tax such as sales tax, which should be reversed. Of course, Income Tax is a social equalizer in the sense that it legally transfers funds from the wealthy to the indigent in the form of social services provided by the government to the poor sections of society.
On the other hand, indirect taxation through general sales tax and arbitrary increase in the prices of petroleum products hurts the people. Any increase in the prices of petrol and diesel results in higher cost to the transporters who increase the fares, and the people are also adversely affected directly by paying enhanced fares. Industries using diesel, furnace oil and lubricants do not absorb the increase in the prices and always pass it on to the consumers. It goes without saying that increase in the cost of inputs results in cost-push inflation, which produces a multiplier effect on general price level, and also make Pakistani products uncompetitive in the international market. However, the most serious aspect of our dire economic situation is the growing public debt, which on one hand limits the capacity to build strong defence and on the other limits fiscal space to invest in human development and infrastructure.
The threats faced by Pakistan have to be understood in the light of fast changing regional and international situation, which add urgency to the revival of economy so that adequate resources could be allocated to counter them. Finance Minister claims that Pakistan can achieve more than six per cent growth. In a post-budge press conference he bragged that Pakistan can achieve 11 per cent economic growth. One would not know how he could give that statement when government could not achieve its targets with regard to fiscal deficit, balance of payments vis-à-vis exports and imports; Pakistan’s external debt is around $90 billion, economic reserves have declined to $12 bn. How Pakistan could achieve the robust economic growth in the case of dismal economic indicators? The next government should bear in mind that it cannot reverse the concessions given by the PML-N government, and will have to work hard to put the economy on even keel to meet those obligations.