Revenue target based on
By AMANULLAH BASHAR
Jun 26 - Jul 02, 2000
Born on October 12, 1999 the present government, still in its infancy
with an age of only 8 months, has managed to present comparatively a matured,
accommodating budget of Rs700 billion for the current fiscal 2000-2001.
The outstanding features of the budget include abolition of Wealth Tax,
duty free import of computer equipments for growth of information technology and income
tax relief to the low-income groups and salaried class. The CBR related revenue target has
been fixed at Rs435 billion, which is higher, by Rs84 billion as compared to the target of
Rs351 billion set during the previous year. Although the fiscal measures taken in the
budget look positive in the given circumstances, unless a drastic cut is made in our
non-development expenditures, the economy may not come out of the huge backlog especially
the foreign debt piled up over the years.
It may be noted here that due to poor economic policies, ever
increasing non-development expenditures and large scale tax evasion the number of people
living below poverty line has sharply jumped up from 25 million in 1988 to 44 million in
In fact the budget 2000-2001 is the first part of a 3-year financial
framework. This 3-year programme has much emphasis on revival of economy through
documentation of a large segment of wild and free economy generally as informal economy,
introduction of strict financial discipline and above all the poverty alleviation from the
society. The budget speech of the finance minister also gives some indications for
clipping the wings of high soaring bureaucracy and the tax evaders in the private sector
who altogether have created a free for all like situation in our economy. The uncalled for
resistance by the business community against documentation of the economy is due to an
state of mistrust between the tax payers and the tax collectors, ignorance from the
benefits of documentation for growth of business on sound footings. Unfortunately, change
of policies with the change of the governments and political influence from certain
quarters is some of the motivators behind the scene. In fact the documentation of the
economy was the responsibility of political or democratically elected governments who
criminally ignored all of them on account of political considerations which miserably
failed to give a direction to the national economy during last 50 years. The poverty
alleviation programme which seems to be main plank of the present government was again the
fundamental responsibility of the elected governments but they did nothing except giving
attractive slogans like "Roti-Kapra aur Makan" or "Apna Ghar" and
"yellow cab" schemes.
In the budget, the government has allocated an amount of Rs21 billion
for poverty reduction programme.
It is heartening to note that the World Bank has endorsed the 3-year
poverty alleviation programme launched by the present government with the approval of 90
million dollars. If the scheme was implemented in letter and spirit the World Bank has
also promised to allocate another amount of $100 million. These funds are likely to be
distributed among the unemployed youths in the shape of small loans. In order to carry out
the scheme the government has also announced establishment of a micro-credit bank for this
The past experience of the government schemes is so bitter in Pakistan
that the people would hardly believe in them unless they taste the pudding by themselves.
Before announcement of the budget, people were attaching great hopes
for some relief in the utility charges, especially in the electricity charges, which are
unaffordable by a vast majority of the general masses. The Finance Minister Shaukat Aziz
however has attached the reduction in utility prices with the expansion of tax net. The
goal of broadening the tax base is however depend on how the tax evaders respond to the
documentation scheme of the government. It is strange that on one hand the moneyed people
always claim to be the great patriot but they are always reluctant to pay the taxes which
is the only way to provide relief to the less fortunate living in this country.
Ali Hasan Rajabali, one of the senior most members of the Karachi Stock
Exchange (KSE) has said that contrary to the concept of arrogance usually attached with
the military government, the current budget is accommodating and friendly to the people.
Commenting on various aspects of the budget, he said that under the given circumstances
the government has presented the best budget. He expressed the hope that the privatization
programme indicated in the budget is a welcome step. Some other positive points of the
budget he feels include government's realization of seriousness of the IPPs issue and its
determination to resolve it as early as possible. He said that it is heartening to note
that the restoration of investor's confidence seems to be the focus of the current budget,
which is the key area for economic revival for this country. Abolition of wealth tax in
general and approval of suggestion for T+3 trading formula at stock exchange in
particular, are welcome steps which would certainly help capital formation.
From Shamim Ahmed
While explaining the salient features of his budget for 2000-2001
fiscal and answering newsmen's queries, the Finance Minister Mr. Shaukat Aziz, in his post
budget press conference in Islamabad on Sunday last claimed that his budget was not a
routine document. The distinguished feature of this budget is that it is a part of 3 years
macro economic framework reflecting the thinking and policies of the government of Gen.
He enunciated the targets to be achieved during the next 3 years as
GDP growth will gradually increase to 6 per cent per annum by
the year 2002-2003,
Inflation, on an average, will be contained at 4 per cent,
Investment to GDP ratio will increase to 18 per cent,
Fiscal deficit will decline to 3.5 per cent of GDP.
Current account deficit will be brought down to about 0.5 per
cent of GDP from 2.4 per cent during the current year.
Foreign Exchange reserves will increase to nearly 12 weeks of imports
from the present level of 4 weeks of imports. Shaukat Aziz said the thrust of economic
policies during this framework will be as follows:
(i) To decelerate the growth on public debt through a
stringent fiscal policy that attempts to significantly reduce the budget deficit.
(ii) To broaden the tax base without burdening people
with additional taxes, particularly on those already burdened with high incidence of tax.
Every citizen must share the cost of governance, by paying a share of his income
commensurate with its level.
(iii) To institute a transparent system of expenditure
control and to effect material austerity in public expenditure.
(iv) To significantly increase the share of social
sector's allocations and poverty reduction programmes, while checking the growth in
(v) To encourage and facilitate investment in
industry, particularly small and medium industry.
(vi) To encourage and facilitate export, particularly
manufactured and non-traditional exports.
(vii) To effect savings, through a stringent control
of losses of public sector corporations thereby relieving the budget of this hidden
(viii) To reconstruct and revitalise the institutions
of governance on the principles of merit and service to people.
The Finance Minister outlined the measures for adoption during the year
to promote exports, these are;
* State Bank would follow an exchange rate policy that
will maintain the competitiveness in relation to market forces and inflationary
differentials between Pakistan and its major trading partners.
* The export-financing scheme would be refocused
towards value added exports and its access by the small exporter will be improved.
* The system of No-duty No Drawback would be further
streamlined and made more convenient to use.
Talking on the anti-smuggling drive, Mr. Aziz said, this drive may
appear harsh to some people, but it is relief measure in the current perspective.
The menace of smuggling is eating away a very vital of our economy. The
smuggled goods, while populating our market, are actually causing unemployment by damaging
our local industry, he observed.
He was of the view that to save the jobs, the fight against smuggling
should not abandoned. The minister said the government was finalising a new law to
re-organise the on-going efforts against smuggling.
To ensure complete transparency in government functioning and good
governance was another related objective of the present government. The Finance Minister
said various measures are being taken. He said to allow public oversight over expenditure,
it has been decided that expenditure figures would be released on monthly basis. This
information would be available on the Web site of the Ministry of Finance starting from
August 2000 when details of the expenditures during the month of July would be made
This is a major departure from the past practice when figures of
expenditure were only revealed once a year at the time of the budget presentation",