Although annual budget plays a significant role in setting a direction for socio-economic development of a country, it has perhaps never been an occasion of happiness for common man in Pakistan.
Liberalisation of the economy over the period of time coupled with hoarding and profiteering in the absence of an effective regulatory framework have made the budget increasingly irrelevant to the masses as variations in prices of essential items have become a matter of days, not months, leave alone a long one year. The budget for 2009-10 is no exception as many people believe that they would continue to face "mini-budgets" in the days to come.
Though, a substantial amount of Rs 646 billion has been earmarked for the Public Sector Development Programme and allocations for health and education sectors have also been raised, these measures are unlikely to make considerable difference to the lives of the ordinary citizens in the face of undesirable affects of the double digit inflation. The imposition of Carbon Surcharge on petroleum products, which has replaced petroleum development levy, will further increase the inflationary pressures and resultantly add to the hardships of common man.
According to the Finance Act 2009-10, the government will charge Rs 8 per litre carbon surcharge on high speed diesel oil (HSDO), Rs 10 per litre on motor spirit (MS), Rs 6 per litre on kerosene oil, Rs 3 per litre on light diesel oil (LDO), and Rs 14 per litre on HOBO.
The 20 percent increase in the salaries and pensions of government employees as an ad hoc relief is in fact an encouraging development, but it will benefit only a segment of the population as majority of the people are associated with private sector.
The textile sector, which earns a major share of foreign exchange to the country and offers job opportunities to a large number of skilled and unskilled labourers, has not been given due attention in the budget, as textile industries are already facing problems due to power shortages, security situation and decline in export orders due to global recession. The expected increase in electricity tariff after a cutback in power subsidy on the dictation of the IMF, would be another drawback for the industrial sector, and it would also overburden common man.
The policy makers, who have always been reluctant to slash non-development expenditures, feel it convenient to put the burden of new taxes on the people to reduce budget deficit. The same happened this year too when the government decided to impose new taxes to bridge a huge budget deficit of Rs 722.7 billion or 4.9 percent of the GDP. The government plans to finance the resource gap with Rs 264.9 billion foreign loan and Rs 457 billion domestic borrowing.
Initially the government proposed a Carbon Tax on the petroleum products and the CNG, but after severe criticism by the business community and other quarters, it decided to withdraw the Carbon Surcharge on CNG. The government had initially estimated a tax revenue of Rs 134 billion from this tax, and even after its withdrawal on ONG, the government would still receive an estimated amount of Rs 122 billion.
It is easier to generate revenue through indirect taxes as compared to direct taxes, but such taxes hit hard the poor as both poor and rich pay the same amount of tax, therefore, it results in unequal distribution of wealth, and this is what is visible in Pakistani society where gap between have and have-nots is gradually widening.
As expected this year too no effort was made to bring the agricultural income into tax net, despite persistent rhetoric by the government functionaries to widen the tax base.
Even, Adviser to the Prime Minister for Finance, Shaukat Tarin, at a post-budget news conference expressed his inability to address the issue of agricultural tax in the face of strong opposition by a large number of lawmakers who are associated with agriculture.
Agriculture has about 24 percent share in the GDP, and it recorded a healthy growth of 4.7 percent in the fiscal year 2008-09 when performance of all other sectors was dismal, but' it contributed nothing to the national exchequer.
Heavy reliance on foreign loans is another concern for the economy, as the country will have to pay Rs 660 billion in debt servicing during this fiscal year. This amount is more than total development expenditures envisaged in the federal budget. At present, Pakistan owes $50.1 billion foreign debt. It is the fact that there are serious internal and external challenges to the economy of the country, but despite all odds a policy shift would be needed to reduce reliance on foreign loans and to set a direction for self-reliance which could mitigate the miseries of common man.
To achieve this goal, the role of policy makers would be of immense importance, but at the same time a political will would be needed for the success of any strategy.