Popularity versus prudence

Everyone is waiting for the Federal budget for 2012-13 because they want to see how the Finance Minister balances the budget without levying "any new taxes". If he succeeds in this endeavour, it would be a miracle worthy of admiration by the hitherto pessimistic commentators.
But media reports, that contain both insider information and speculation, suggest that more than one draft of the budget speech is being prepared. Why would the finance minister need several drafts thereof? Could the proposal packages be changed at the last minute to assure the budget's 'popularity'?
Should popularity be the passing grade for the budget, or the way it proposes to make the most prudent use of state resources, particularly for an economically distressed country like Pakistan? Indications are that the tilt overwhelmingly will be in favour of popularity, not prudence. What a reputation of a regime!
True, in democracies, budgets presented by troubled regimes before parliamentary elections, are drafted as silencers of popular dissent but if the finance minister is equipping himself with several drafts of his speech, it exposes something worse. In difficult times political parties turn into stooges of shadowy special interests.
This year, another oddity is that the Federal Bureau of Statistics will release its report for 2011-12 just a day before announcement of the federal budget. How much time will the parliamentarians have, let alone the rest, to go through it to assess the credibility of the forecasts and targets set in the budget?
This is hardly the setting wherein the budget, and the proposals it contains, could gain acceptability. As it is, the statistics released so far don't build high hopes about the ability of the regime to arrest the hike in fiscal, trade and balance of payment deficits, or in inflation, all because of sustained bad governance.
Particularly disturbing are the latest IMF predictions about the expected decline in foreign exchange reserves during 2012-13 because they foretell serious problems in meeting domestic demand for imported goods (especially oil) and sustaining the exchange rate of the rupee.
In this setting, to begin with, the two ways to contain fiscal deficit (likely to touch 7 percent of GDP in 2011-12) below 4.2 percent of the GDP, are drastic cuts in current expenditure to save and divert resources to the power sector and a massive effort to cleanse and revamp public sector enterprises (PSEs) for privatisation.
Both actions call for not just stopping outlay of resources but doing it very tactfully so that while waste and corruption is contained, the state offices and PSEs are not crippled. But this calls for vision and prudence, and shunning cronyism that encourages both waste and corruption.
But these are attributes of a responsible parliament that has moral and professional capacity for supervising the actions of the bureaucracy. That all these attributes are virtually absent in the sitting parliament, has been amply proved by its track record of the past four years.
The fact that since June 2009 public debt has nearly doubled does not suggest that our parliamentarians care much for their solemn obligations. Indeed, the rise in oil price was a big trigger of resource need, but wasn't this development also a signal for adopting austerity and checking resource leaks? Did we do that?
If the parliament merely passes the increase in international commodity prices on to the people without caring about the ability-to-pay of the various sections of the electorate then you begin to doubt the role of the parliament as the institution obliged to bridge the rich-poor gulf.
The fear being expressed by most observers is that, to please market participants, this budget will not impose fresh taxes on income; instead it would go for more and higher indirect taxes without caring about the fact that indirect taxes broaden the rich-poor gulf.
Let us hope that this doesn't happen for another reason too; except for the indirect taxes that the state recovers at source, most indirect taxes recovered by businesses on behalf of the state are not surrendered fully to the state. All these taxes end up doing is enrich the rich (businesses) and further impoverish the already poor.
The fact that now over 40 percent of the country's population is below the poverty line mandates, for a start, that reliance on indirect taxes is reduced followed by a complete overhaul of the system that supervises recovery of indirect taxes collected by businesses.
In 2011-12, the FBR did show signs of flexing its muscle in this crucial area, but that is just the beginning. In many cases, the notices issued are based on assumptions, and so may be successfully contested by the alleged tax evaders. This is because there is no agreed system of record-keeping.
This effort cannot succeed until record-keeping systems for businesses are clearly specified and recording of transactions can be verified from a set of connected books/records ie made fool-proof to a point where FBR can credibly claim the amount without giving rise to too many legal battles.
For four long years the PSEs were used as the venues for employing cronies and party workers - a policy that brought the PSEs close to bankruptcy. Should we expect that the finance minister will promise a visible reversal of this policy? Will he promise measures and resources for healing these bleeding wounds?
There are those who subscribe to the view that the shattering of Pakistan's economy wasn't a mere accident; there was purpose behind it; that purpose was to wreck the country's economy to a point where no other political party would find it worthwhile to even think about being in power.
Whether this end was intended or the result of a huge deficit of a sense of responsibility and professionalism in the regime is a moot point. But the fact is that the economy has been wrecked. While PML-N - the only opposition party in the parliament - is blamed for not stopping this rot, the criticism isn't wholly fair.
In a parliament, two-thirds of which always is on the government's side, PML-N couldn't have done much. The coming budget too would (in spite of whatever distortions it may contain) be approved. The tragedy of Pakistan is its landlord-led leadership, and under democracy, it shows its true colours.
For the saner elements, it is time to think about the future course of action and evolve strategies that can keep the economy from collapsing completely. Pakistan has enormous human and natural resource potential; we just have to wait a little longer for a positive change in the leadership that is now unstoppable.