HARSH BUDGET: PM EXPLAINS COMPULSIONS

Opposition calls figures bogus

From SHAMIM A. RIZVI, Islamabad
Jun 22 - 28, 1996

In an unusual gesture, perhaps for the first time, the prime minister invited senior economic journalists from all over the country for a briefing on '96-97' budget in the PM House on sunday morning. After explaining the compulsions of the government for a harsh budget, the prime minister discussed with patience and in a relaxed atmosphere for well over 2 hours the various aspects of the budget and agreed with the questioners that some proposals needed reconsideration.

She agreed with a journalist that it needed a probe as to why CBR has failed to meet the target of revenue collection despite a number of downward revisions and constituted a committee of 3 senior journalists, comprising , M.A. Zuberi of Business Recorder, Ziauddine of Dawn Bukhari the local representative of Financial Times, London, to look into the matter and file its report within 30 days. "Make necessary arrangement; they will work as my consultants," she directed a visibly unhappy V.A. Jaffery, her advisor on economic affairs.

On a suggestion from another newsmen she directed Mr Jaffery to reduce excise duty on bank cheque books which has been raised to Rs 5.90 per page in the finance bill. When this correspondent pointed out that a general hardship would be caused by the decision to make all allowances of the employees of corporate sector such as house ret and transport allowance taxable, the prime minister agreed it was harsh and promised it would be corrected.

At the outset of her briefing the prime minister explained the 3-D strategy of her government for the solution of the country's problems, for achieving (1) democratisation (2) meeting demographic pressures and (3) handling debt problem.

She gave details of how democratisation process was taken on its way to maturity, how population pressures were being tackled with the population growth lowered from 3.1 percent in 1988 to 2.9 per cent in 1993 and now 2.6 per cent.

On the problem of debt, she said, external debt of about 81 billion been repaid, while the resource mobilisation efforts were launched to stop increase in the domestic debt.

During the two and a half hour briefing, the prime minister dealt on wide-ranging subjects on her own and those raised by the correspondents.

She said after Tarbela Dam, there were no hydel power projects in the country. So, on a short-term basis, thermal projects were undertaken in the private sector. But on a long-term basis, hydel projects are being taken up again beginning with Ghazi Barotha project.

The government is worried over that fact that it has to pay $ 4.5 billion annually for the private power in the shape of prices of power produced in the private sector and prices of fuel oil. A high-level meeting will be called soon to consider the situation.

An expert is being hired as a consultant to study the problem of domestic debt and to find ways to solve the problem.

The prime minister repeatedly emphasised on the reduction of budgetary deficit from 5% this year to 4% next year as the single most corrective measure to address most of the ills of the economy.

Taxation could put a stop to the increasing inertia of debt burden, reduce-inflationary pressure and restore international investor's confidence in the economy.

Civil government's expenditure being small, offers no manoeuvarability for control. Yet, her government had adopted symbolic gestures like ban on new cars for ministers for three years, limitation in the size and frequencies of foreign visits and even attendance in marriages. The debt-servicing liability is the accumulation of debt taken during the past regimes, while defence expenditure had directed relation to external security.

Prime minister Benazir Bhutto said, Pakistan, like many other countries, has to be self-reliant in the post-cold war era.

She said, in the 1950s, as a member of CENTO and SEATO, Pakistan was getting a lot of foreign aid. In the 1960s, there was a green revolution within the country, while in 1970s, Pakistanis benefitted from the oil boom in the Middle East. In the 1980s, too, because of the Afghan war, there was a steady flow of Western aid including $ 4.2 billion from the United States alone.

Now this boom is over and Pakistan is entering into the 21st century as a self-reliant nation and stands at the cross roads to Central Asia. It is to be run on our own investment which partly comes from foreign investment. This is a transition period during which the people will have to make sacrifices for a better tomorrow.

While opening the debate on the budget in the National Assembly in the afternoon, the leader of the opposition Mian Nawaz Sharif made a scathing criticism of the economic policies of the government. He said these budget proposals, if allowed to be implemented, would lead the nation to destruction as they will crush the middle class, increase unemployment, eliminate small traders, make the agriculture fields barren and plunge the nation into darkness. "We don't accept this budget and we refuse to be a part of this anti-masses plan of the government", Mian Nawaz Sharif said before leading the opposition out of the house at the end of his hour-long written speech.

She said she was not satisfied with NFC Award which was more generous to Punjab ans Sindh while neglecting the NWFP and specially the Balochistan. Punjab was showing billions as surplus while Balochistan was finding it diffucult to meet its genuine and urgent requirements. "We will change it and make it more justifiable", she dedared. Having surplus funds Pujab does not feel the need to introduce farm tax. We are using all our persuasive power to persuade the provinces to introduce farm tax but we have no dictatorial power. Even a dictator like Gen. Zia could not do it, she added.

The leader of the opposition, in his 15-page speech pointed out a number of anomalies. He, however, did not give any positive suggestion and remedial measures to soften the budget for the masses.

He also touched upon the alleged mansion purchase deal, by the prime minister and her spouse in Surrey. He produced a photo copy of another fax message carrying a news item published in the Sunday Express as a follow-up story. Not only the earlier details of the mansion deal but the details of the abandoned cargo consignments sent from Karachi and Lahore were also mentioned in the story.

He said the budget had been prepared by those who were totally unaware of the economic situation of the country and the miseries of the poor masses. He said the government claims to have reduced the budget deficit "but at what cost? he asked. "On average the cost of essential items, i.e. food, cloth, power and education has been raised by a minimum of 200 per cent. The common man who needed Rs 2,000 per month a couple of years ago now needs Rs 5,000 and still he finds it not enough," Mian Nawaz Sharif said.

He said: "The prices of fertilizers, pesticides and tractors have gone up 200 to 300 per cent since our government was removed illegally. We had planned pavement of canals. Had we stayed in power this project would have been accomplished by now with farmers all over the country reaping the benefits. The prime minister demands of the masses to offer sacrifices! For what?" he asked.

He alleged that the facts and figures presented in the budget are all false. "In the budget the total deficit has been shown as Rs 117 billion which is not correct. For the year 1995-96 the government spent Rs 15 billion more than the estimate and this year this amount is bound to sore upto Rs 20 billion. The economic experts believe that the government's claims of reducing the budget deficit upto 5.5 or 5 percent are false. In fact the deficit is 6 per cent, he claimed.

He alleged that the government had consumed billions of dollars deposited in the foreign currency accounts. Investment had dropped and the MOUs worth US $22 billion remained confined to papers. The heavy industry, which showed five to seven per cent progress per annum over the last three decades slumped to 0.5 per cent only in the year 1994-95. Even for the fiscal year 1995-96 the progress of heavy industry has hardly touched the mark of 3.1 per cent. But this could also be a lie like all other figures presented in the budget because the State Bank in its records has shown the progress rate as 0.6 per cent for the heavy industry and 8.4 per cent for the small industry, Mian Nawaz Sharif said.