How will you define the budget-making process in Pakistan? The answer is: It is the same exercise of managing figures, plugging gaps, trade-offs and realignments of duty slabs, tariffs and tax slabs and similar adjustments. There is not much of out-of-the-box approach nor is there any ingenuity at work.
Finance Minister Ishaq Dar presented to the federal cabinet last Wednesday the Budget Strategy Paper (BSP) for the next fiscal year (FY16-17) with a target to spend Rs 1.497 trillion on development, reduce fiscal deficit to 4 percent of GDP and scale it down to 3.5 percent by FY17-18, increase economic growth (GDP) to 6.5 percent and 7 percent by FY17-18, limit inflation to 6 percent, reduce unemployment to 4.8 percent and to 4.5 percent by FY 17-18. The country's current account deficit, estimated at 1 percent of GDP this year, would go up to 1.1 percent next year and 1.2 percent in FY17-18.
The significant part of the BSP is that the development outlay for the next FY would be jacked up by 14 percent to Rs 1.497 trillion from the current outlay of Rs 1.315 trillion of which the public sector development programme (PSDP) would be increased by 14 percent to Rs 800 billion from the current allocation of Rs 700 billion. Likewise a cumulative increase of 16 percent is planned for the four provinces which would increase to Rs 696 billion from the current revised figure of Rs 600 billion.
The social sector is allocated Rs 545 billion under the domain of the provinces. For investments in the public and private sector, the main focus of BSP is the energy sector and infrastructure whereby targeting a total investment of US $17.8 billion in FY16-17 as against $10.4 billion this year which is an increase of 71 percent. Out of this an investment of US $3 billion is foreseen in gas projects against US $880 million this year which is a phenomenal increase of 240 percent. Power sector is targeted to attract US $10.5 billion investment in FY 16-17 as against $7.5 billion investment jointly made by the public and private sector this year. Whereas transport and infrastructure projects are targeted to invoke an investment of US $4.3 billion as against $2 billion this year.
The result expected out of these investments is that the power generation from gas would add 5000MW to the national grid in the next two years which is an increase of 30 percent over the current power availability on the grid, whereas, the gas supply to consumers shall increase from the current 250mmcfd to 1,120 billion cubic feet per day which is an unprecedented increase of 350 percent.
The budget strategy paper, as a routine each year, presents a good amount of admirable and ambitious figures but is silent on the strategy itself how to go about in meeting these targets, the strategy to plug the gaps and deterrents which eventually defeat the achievement of targets, the outcome and roadmap of the fiscal and structural reforms the government is committed to pursuing under the IMF programme, the strategy to balance investments in the social sector and energy and infrastructure as per the needs of all segments of Pakistan's society.
The paper is also silent on how it intends to address serious issues such as the loss-making business enterprises in the public sector; these issues have acquired a new dimension following government's decision to put its sell-off plan that it had been vigorously pursuing for three years on hold. How the government intends to arrest the persistent circular debt which is bleeding the energy sector and is a deterrent for foreign investors? The energy sector, which is under the BSP, continues to suffer from poor governance with no significant improvement in arresting line losses, receivables or management of enterprises. What strategy the government has to deal with this unmanageable public sector?
The ambitious growth target of 6.5 percent is primarily based on the assumptions of capacity enhancements in gas and power sector, investments foreseen in the China-Pakistan Economic Corridor and significant improvements in security conditions. There does not appear to be a concrete strategy of the government to enhance industrial and agriculture growth, exports and Foreign Direct Investment (FDI) in real terms. In any developing country these areas are the real drivers for a sustainable economic growth, employment opportunities and revenue generation in terms of taxes. The government will miss this year's GDP target of 5.5 percent mainly due to severe setback to the cotton crop.
Pakistan's industrial sector has been struggling on account of high cost of doing business and non-availability and affordability of power. While the government is inaugurating new industrial parks, the existing ones are dying. At the National Industrial Park in Karachi's Korangi Creek, operative under the Federal Ministry of Industry, over 50 new industrial units are awaiting for over two years the approval from the cantonment board of their submitted drawings and plans to help them start production. Government's indifference towards other industrial parks is also quite known.
Pakistan's agriculture sector, inclusive of crop and livestock accounts for 21 percent of its GDP and employs about 43 percent of the labour force. This tradition sector is suffering from lack of technology, high input costs and lack of marketing skills for domestic and export markets.
Foreign Direct Investment (FDI) in real terms and as reported by State Bank of Pakistan has not returned back to Pakistan after touching a peak of over US $7 billion in 2007 with a corresponding GDP growth of over 7 percent. It is now hovering around a billion dollar or so. Much of the foreign funding channelling into Pakistan's energy and infrastructure projects under economic corridor are commercial loan dedicated it specific projects and some foreign equity in power projects.
The government needs to focus on the above three sectors as it truly merits. Implementation of projects and management of funds is the major issue in Pakistan where a good 30 percent if not more of allocated funds are wasted on this very account. Any government claiming to be doing all in public interest must address this menace. The solution is simple to start with, by opting for a professional approach managed by competent managers rather than the one based on vested interests managed by subservient people looking after theirs and their master's interest. This is not happening and the government is far from opting or working on it. Performance continues to business as usual.
Though the figures presented in budget strategy paper are impressive, the enlightened people of Pakistan would also like the government to make transparent the issues attached to it and how the government intends to address them.
(The writer is former President of Overseas Investors Chamber of Commerce and Industry)