Budget 2014-15

Dr Shahida Wizarat, Director Research, Chief Editor PBR, HOD Economics, IOBM

The rate of growth of the economy at 4.1% last year was less than the target, while the target itself was quite modest. This reminds me of the 1990s decade when successive democratic governments had been borrowing heavily from the IMF due to which the average annual rate of growth for the 1990s was only 4.6% which was the lowest rate recorded for any decade in the economic history of the country. And today our target rate of growth is less than the lowest rate recorded in history, and we cannot even achieve that! Countries that borrow heavily from the IMF experience pathetic growth rates on account of stringent IMF conditionalities like tight monetary policy and outflow of resources to service foreign debts. Latin American countries had similar experience during the 1980s till such time that instead of sacrificing their growth rates to service debts, these countries formulated their debt management strategy popularly known as the Cathgena Concensus Proposal. And from then onward there was no looking back as under the able leadership of their leaders they were able to revive their economies and raise their growth rates to respectable levels. Successive Pakistani governments have either no interest or realisation that the massive servicing of debts is constraining our growth rates. And this necessitates formulation of a debt management strategy for the country. And yet the budget did not contain a strategy to manage our debts, with obvious implications on our growth rates in future as well.

In some provincial budgets there is increase in expenditures on police, but no serious attempt at formulating an anti terrorist policy in the country. Mere increase in expenditures for the police is not likely to deliver the desired results. The present policy, if you can call it a policy is very racist. It has divided those involved in unleashing terror in Pakistan into two groups, the master minds and the foot soldiers. Every time a master mind of terror is arrested in Pakistan he is released immediately without framing any charges against him, specially if he is of Western origin. This is borne out by the recent brief arrest of an FBI agent from Quaid-e-Azam International Airport, Karachi a few days before the airport was attacked.

And the length to which state institutions in Pakistan go to get a mastermind of terror released and sent back to his home country comes out very clearly as witnessed in the case of the CIA operative Raymond Davis. Very soon after his arrest a minister of the then civilian government came to his rescue and stated that being a diplomat he enjoyed diplomatic immunity. This was followed by the deal hammered out for him between the then Army Chief and General Petrayus which made a mockery of the principles of qasas and diyat. The deal ensured that the murderer of two Pakistanis whose laptop contained links to 119 terrorists would be bailed out using the blood money donated by a Pakistani businessman. When the matter went to a court it was dismissed as it was deemed not important enough to be heard by a higher court. The police, the agencies and the courts enforced the deal on the victims of the families, in spite of the fact that the widow of one victim took her life as the deal decided by people who had no jurisdiction to take the decision as per the Islamic principles of qasas and diyat was not acceptable to her. The point is that the state institutions aid and abet the masterminds and perpetuators of terrorist activities in Pakistan if they happen to be from the USA/UK or a rich Western country. But when it comes to tackling the foot soldiers who happen to be Pakistanis, Uzbek, Chechen, etc, we bomb not only those who are exploding bombs, but their families, friends and those living in the same city as jets are used to bomb their homes.

When the government signed the agreement with the IMF a conditionality required 15% shares of OGDCL and PPL to be floated in stock exchanges in the US. This was worrying as oil and gas sectors are of strategic nature and countries big and small are protecting their strategic sectors and preventing them from falling into foreign hands. Instead of learning from governments that are privatising while taking care of their strategic interests, the government has decided to offload 100% shares of these strategic assets! Either the government is unaware of the importance of strategic assets or couldn’t care less what could happen when these are in foreign hands.

In his budget speech the Finance Minister Minister said that amendments in the Seed Act and Plant Breeders Protection Bill will be passed through the National Assembly. This is in spite of the fact that after the passage of the 18th Amendment, agriculture is a provincial subject and the 12 May 2014 judgement of the Lahore High Court ordering that no licences for Genetically Modified Organisms (GMO) be approved till such time that a legal framework is put in place. This decision halts and prohibits the availability and sale of new GMO seeds in Pakistan including Bt cotton and corn. The tone in which the Finance Minister expressed his resolve to get amendments in the Seed Act and Plant Breeders Protection Bill passed by the National Assembly shows how closely he is pursuing the interest of big corporations producing Genetically Modified (GM) seeds.

When the Finance Minister stated that he will expand the tax net little did we realise that he plans to get widows and pensioners into the tax net. He has fulfilled his promise, but by targeting the lower income brackets, pensioners and widows. Imposition of taxes on the profits made on Behbood certificates by senior citizens is one such proposal that will break the back of those who were living hand to mouth on this sources of income. Another such proposal is the imposition of 2% tax on sale and purchase of property by citizens who are not in the tax net and only 1% tax on those in the tax net. Since higher income people are in the tax net and low income people, pensioners and widows are not in the tax net, the taxation system by increasing the burden on them, will become even more regressive. Another proposal that will make the system more regressive is reduction in duties on >1800 cc cars by 10%. The government’s decision to bring the paan wala, parchoon walla, small petty traders into the tax net instead of wealthy Pakistanis will make the system even more regressive.

Federal government has increased the allocation on education, but most of it is bound to get lost due to corruption. This is because there is a lot of corruption in the education sector with most of the budget getting siphoned off to purchase property, etc for officials in public sector universities, etc. Further no allocations for local governments in the budget shows the lack of commitment to democratic values by the Government and reveals the real intentions of the government to hold local government elections!

Moreover, none of the provincial governments proposed agricultural income taxation or other measures that could increase the contribution of wealthy segments of the population for economic development of the country. The provincial governments like the federal government are just as committed to protect the interests of big farmers, industrialists and other fat cats that have entered the ranks and files of their parties.

Email address: zidie22000@yahoo.co.uk