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Budget: Mixed reactions

  1. New trade policy
  2. The fishing ban
  3. Budget: Mixed reactions
  4. Water crisis in Pakistan agriculture

There is a visible concern for the poor

Jul 03 - 09, 2000

A mixed response has been received from different quarters in respect of the budget for the financial year 2000-2001 announced by the Finance Minister Mr Shaukat Aziz on Radio and TV late on Saturday night. Industry & trade circle have termed the budget as business friendly and export oriented. Some of the Associations have described as ideal under the prevailing economic conditions while the independent economists deem it to be too optimistic.

The business community has said the budget is a sincere effort to boost the economy but the analysts see a number of mini-budgets in the near future. As the optimistic revenue target envisaging an increase of about 25 per cent could hardly be achieved, this will head to mini-budgets to meet the shortfall.

Most of the traders and industrialists welcomed the budgetary measures including the abolition of wealth tax and increase in public sector development programme. Small traders had divided opinion on the budget. A group supported the budgetary measures and other found it against them.

Rawalpindi Chamber of commerce and Industry (RCCI) President S.M. Naseem terming the budget 2000-2001 as balanced said it was an ideal budget in the present economic situation in which bold decisions had been made.

In a statement issued here on Sunday, the RCCI Chief said the economic measures proposed in budget would have positive effects on the economic development and exports of the country. He appreciated government's commitment to self-reliance, increase in education budget and relief announced for various sections of the society.

S.M. Naseem said, abolishment of Wealth Tax, a long standing demand of the trader community, would increase the growth of capital, and withdrawal of customs duty on the raw material used in some local industries would help strengthened the industrial sector of the country. He said tax concessions on import of sugar would help keep the price of sugar within the reach of ordinary person. The facilities announced for Ghee mills were also a step in right direction, he added.

Former vice President of FPCCI and Ex-State Minister of Industries, Younis Elahi Sethi has termed the national budget 2000-2001 as 'suitable' for prevailing economic conditions of the country He said, initial review of the budgetary documents reveal that government has prepared this budget with great hardwork and if the policies formulated in it were followed in letter and spirit, the economy of the country would definitely improve.

Younis Elahi also praised measures announced in the budget for revival of industries specially the sick ones and measure to reduce the budget deficit from 6 per cent to 3 per cent. All Pakistan Textile Processing Mills Association (APTMA) Chairman has termed federal budget for the year 2000-2001 as positive, balanced and most daring in the prevailing economic scenario. He said that measures have been proposed to discourage unnecessary imports, encouraging exports, appointment of Tax Ombudsman, abolition of Wealth Tax revival of sick units with special stress to promote small and medium sized industry, encouragement of Corporate sector and reduction in number of taxes are some bold steps taken in the federal budget to reshape the economy.

The exporters have highly lauded the budget for 2000-2001 especially the announcement about abolition of wealth tax, special exchange mechanism for currencies of the trading partners and more export refinancing for value-added exporters. Javed Chinoy, Central Chairman of Pakistan Ready-made Garments Manufacturers and Exporters Association (PRGMEA), said that the budget was a truly export-oriented budget which has laid special emphasis on incentives to the value-added sector which was ignored in the past. He said the government had accepted PRGMEA's demand contained in its budget proposals for abolition of wealth tax which was the main source of increase in black money. He expressed the hope that the measures taken in the new budget would go a long way in boosting exports to the targets set by the government.

Shabir Ahmed, Chairman of Pakistan Bedwear Exporters Association (PBEA) has criticised the increase in tax on exports which would hurt exports. He welcomed the abolition of wealth tax and said that no measures were announced to prefer export to value-added products over raw materials such as cotton and yarn. He demanded immediate withdrawal of export refinance allowed to the yarn exporters.

Referring to the announcement of introduction of 'no duty no drawback scheme' Shabir said that the scheme would only benefit only large textile units and while the smaller units would become incompetitive in the export market. He advised the Finance Minister to consult the trade before finalising the scheme. He said the export target of 12 billion could only be achieved when the export of raw material such as cotton and yarn is restricted and export of value-added sector is encouraged.

According to independent economists, the budget is optimistic as it proposes a nearly 20 per cent increase in the development budget and 24 per cent in the collection of the Central Board of Revenue (CBR) next year. It is also optimistic when it proposes to decrease the debt servicing by 2.6 per cent and the defence budget by nearly seven per cent, though this has been achieved partly by transferring Rs.26 billion of military pension to the civil administration head. It is most optimistic when it assumes that next year it would collect as much as 44 per cent more from the sales tax head of the revenues. This optimism looks misplaced if a quick analysis of the performance of the annual budgets in the last several years is done. And if what happened to the current year's budget is any indication, then the budget 2000-2001 presented by Finance Minister Shaukat Aziz on Saturday can only be described as a wish-list of a man with his head in the clouds.

What is more confusing is the projection of Rs.9.755 billion as wealth tax collection next year. It is a 127 per cent rise over the current year's wealth tax receipts of Rs.4.3 billion. How could this sudden and sharp rise in wealth tax revenues come about when this tax is to be eliminated after June 30 next year. We have not been provided with any convincing explanation either in the budget papers or by the finance minister.

This is certainly a budget based on hope and wishes if that can be materialised through tax reform, documentation of economy, eliminating corruption and creating tax culture as planned and announced by the Finance Minister, the budget is most welcome which has offered some thing to all groups of people ranging from richman paying or evading wealth tax, to the salaried class, teachers and researchers in particular and those involved in promoting the emerging science of information technology.

The most gratifying aspect of the new budget is its visible concern for the plight of the poor. It has advisedly proposed a number of concrete measures for poverty alleviation like the launching of an integrated small public works programme costing Rs.15 billion, the food support programme in which about 1.2 million poorest households will receive an annual cash subsidy of Rs.2000, an increase in the monthly cash transfer under the Zakat scheme from Rs.300 per month, to Rs.500 per month and the launching of the micro-credit bank from August 14. The allocation made for all these programmes is more than Rs.83 billion which is almost exactly the amount the budget expects the CBR to collect over and above what it has collected this year. A tall order, no doubt, but any slippage like this year on this score would only add to the plight of the poor.