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Budget 2000-2001

  1. Budget 2000-2001
  2. Revival of sick units
  3. It is not a routine budget
  4. Comman man and the budget
  5. Towards lead free society
  6. The declining prices of Palm oil

Revenue target based on assumptions

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 2000.

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 purpose.

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.

3 years framework

From Shamim Ahmed Rizvi,

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. Pervez Musharraf.

He enunciated the targets to be achieved during the next 3 years as under:

— 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 expenditures.

(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 burdens and.

(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 available.

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", he said.