Tag Archives: budget

Time for a consensus on economic policy

Raza Rumi

The recent decision of the federal cabinet to rationalise General Sales Tax (GST) and levy a one-time flood surcharge are much-needed reforms to bolster Pakistan’s elusive and perhaps unattainable ideal of economic self-reliance. A state, which has perfected the art of collecting and negotiating rents for its strategic games, is least interested in creating a redistributive welfare state.

The emergence and fortification of a rentier state, therefore, is neither peculiar nor new as phenomena. However, it has now come to haunt the future of the country due to the evolution of rent-seeking culture, which is almost a way of life. We need no half-baked perceptions-based studies from abroad to know that crude and sophisticated forms of corruption are now embedded in our public life. From the delivery of a basic service to the purchase of a submarine, this is the way the country functions. The elites have strengthened trends such as tax-evasion and made them legit mechanisms of governance and public affairs.

Tragic that the world leaders such as Hillary Clinton had to remind Pakistanis about how they were not willing to pay up in the face of the 2010 floods devastation and were continuously looking towards the West and international community at large. Such a debate should have emanated from Pakistan’s Parliament and its patriotism-obsessed media. But this did not happen as all barons are averse to paying taxes in this country. Continue reading

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Pakistan’s budget: Policy sans public

Raza Rumi
Last week, a former Minister while referring to the budgeting process remarked how the budget documents were accessible to only 3% of the parliamentarians. A lady MNA whom I met after the budget speech was ploughing through the shabbily printed pink documents, looking for the allocations for regulatory bodies and both of us could not find the relevant figures. This should be enough to describe the inaccessibility and obfuscated nature of the budgeting process in Pakistan and several other developing countries.

Executive board-room syndrome
: Lack of public consultation in the budgetary processes is another hallmark of how the executive formulates the national priorities and finances them. Our state considers the people as ‘beneficiaries’ and ‘recipients’ of the wise decisions made in air-conditioned secretariats and donor board-rooms. This is why the economic and social policies are seldom reflective of the will of the people. Pakistan’s deep rooted authoritarian tradition explains this dilemma. But the civilian governments have rarely attempted to change this trend. More often than not, they also rely on the same evergreen bureaucrats. Our present elected government has chosen economic managers who are former international bureaucrats representing the good-old Washington Consensus.

Lack of participation:
Across the globe, pre-budget consultations are exercises seeking public support and inputs for policy. Countries in democratic transition are adopting participatory decision-making processes. There is also a growing consensus that budget decisions need to be subjected to public scrutiny and debate. Earlier, our government organized seminars in big cities and consulted the business, middle classes and other stakeholders to frame the policies. This time last-minute public consultations focused on the VAT issue. Quite obviously, for purely political reasons, these consultations have failed and we have a higher GST rate thereby more exposure to inflation.Development charades: The development allocations at the time of the budget announcement are almost always notional. Invariably these are slashed in the last quarter when fiscal crunch hits the government (40% in the last fiscal year). The new PSDP is Rs 663 billion but it remains to be seen if this will hold. How has it been estimated and prepared; only a handful of people know. The overall ceiling is guided by the NFC award. But, does it address the key development challenges? Perhaps not. Overestimated figures from the Friends of Democratic Pakistan were also factored in the previous years and even this year the allocations reflect what is expected and not necessarily what we have or need.

Lobbies who always win: As before, the big business, the landlords and the security establishment benefits from the limited resource base. The business lobby has avoided VAT at least until October, no mention was made of agricultural income tax in the budget speech and of course the defence budget is higher by 17%. The local vehicle-manufacturing industry will continue to enjoy protection. Much of the defence budget is hidden under the “General Public Services” category as the salaries and pensions are not reflected in the defence category.

Inflation will rise:
Contrary to various claims, inflation is here to stay. Higher energy prices and increased GST will lead to further increase in prices of commodities with a direct impact on the poor and the fixed-income groups. Apparently a study has been carried out to disprove the link between GST and inflation but it is not in the public domain. If and when VAT is imposed, inflation will further increase whether we like it or not.

Saving graces: Three key policies are somewhat promising. First, the focus on energy conservation, by providing 30 million energy savers, is a step in the right direction. The allocation of Rs. 40 billion for Benazir Income Support Programme and lastly the increase in salaries of the government employees are commendable policy decisions. It is not clear, though, as to how far the pay and pension commission’s recommendation was taken into account while finalising these figures.

Sterile debate:
Given the lack of budget awareness, the new gurus of Pakistani conscience have been holding endless talk shows on the budget. The commentary by TV anchors and their ‘political’ hosts is emotional and largely uninformed. Debate is good but spiraling ignorance is something that we must avoid. Similarly, the polemical statements in the National Assembly are intriguing. For instance, the leader of the opposition criticized the increase in government salaries for the adverse fiscal impact on the Punjab government, and at the same time lambasted the government for not doing enough for the vulnerable. MQM’s refrain that electricity should be cheaper in Karachi is also beyond logic.

Pakistan’s democracy is nascent and fragile. However, it is also an opportunity for the budgeting process to be reformed. The government should involve the media and civil society in raising awareness and building consensus on reform. In several parts of the world, accessible materials to increase budget literacy are commonly used. Similarly, it is time that the legislators are made more familiar with the budget process to enhance public oversight. Techniques that track inter-governmental expenditures can help reduce corruption and waste. All of this requires deepening of democracy, civil service reform and the emergence of a responsible media. We need a light year to get there.

First published in The Friday Times, Lahore (June 11 issue)

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Pre-budget advice from Lahore

By Dr Pervez Tahir

INDEPENDENT think-tanking, especially on matters economic, has not been an established practice in Pakistan. In the run up to the budget, a plethora of unhelpful ideas do flood the system from various interest groups. There is also a tradition of Continue reading

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Pakistan: IMF Programme needs to be debated

by Raza Rumi

The not-so-inevitable is about to happen. After weeks of groping in the darkness of global financial mess, the Pakistani government is negotiating with the International Monetary Fund. Admittedly, Pakistan’s options are limited, given its intractable dependence on oil imports for survival. The civilian government moving from one crisis to another has elevated indecision to a policy status. This does not imply that we start echoing the unwise cacophony of impatience with an elected and far more legitimate government than the eight-year-long authoritarian regime. But then who cares: if recent history is a guide, PPP governments come with a brand or at least get branded as incompetent comprising coteries of cronies, as if the rest of the country is a fair, rule-based haven.

The plain truth is that the power-wielders of Pakistan have been following a set of disastrous policies for decades that have now put the survival of the state, or as we knew it, in question. From the great hunts for strategic depth and Jihad, and from nurturing domestic oligarchies and pampering a delinquent industrial sector at the expense of land tillers and equitable irrigation, we are now paying the price for policy making by the elites for the sustenance of the elites. Continue reading

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Still on the wrong foot

Despite the high aims and hopes, the actions taken for the improvement of the education in Pakistan, have not really been reflective of the ambitions
By Tahir Ali

It is said that Pakistanís first five-year plan was borrowed by Korea. Taking advantage of it, Korea has reached to enormous heights. Since 1991, the enrolment rate is 100 percent for primary school there, 95% for middle school, 88% for high and 38.1% for higher education. The figures may have improved further as the data available with the writer is a bit old. Education is compulsory from 6 to 14 and between these ages there is practically 100 percent attendance at school there.

Pakistan, on the other hand, has been through many educational policies and five year plans which served as conceptual frameworks and plans of action for the development of education in the country. In 1947, the First Educational Conference was held in Karachi. In 1959, the Commission on National Education put forward its recommendations for the advancement of education in the country. They were followed by Educational Policies of 1970, 1970, 1972-80, 1979, 1992, 1998-2010, 2002 and in a couple of months, the present PPP-PML(N)-ANP-JUI-coalition government is going to present its educational policy. Continue reading

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