ECONOMY

 

FORTHCOMING BUDGET TO BE PRO-POOR

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Budget to be presented by Omar Ayub Khan on June 6

 

From SHAMIM AHMED RIZVI,
 Islamabad

May 30 - June 05, 2005
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Omar Ayub Khan, Minister of State for Finance will present the federal budget 2005-06, on June 6, 2005. Though a little time left, yet the budget was still being finalized these days amidst pressing demands from all segments of the economy.

In the light of speeches of the ministers and other senior officials from different platforms and pre-budget seminars and workshops have, however, raised the hopes that the budget would be addressing the problems of the poor by providing much needed relief.

Advisor to the Prime Minister on Finance and the brain behind the budget making exercise, Dr Salman Shah, recently assured the participants of a pre-budget seminar that it will be a pro-poor and investment-friendly budget with special focus on the development of social sector and welfare of the people.

He said "we are working on a multi-pronged strategy for not only sustaining "economic growth but also accelerating its pace to improve the quality of life by transferring the benefits of economic growth to the level of common man".

However, the fact remains that due to idle production capacity, growing automation and world-wide drive for productivity, creation of new openings were not sufficient to address the issue of unemployment in Pakistan. It is generally believed that the incentives announced in the federal budget for development projects are usually pocketed by the business community itself. Consequently, the rich become richer while the poor remains poor.

The salaried-class attaching hopes that the forthcoming federal budget will carry some good news such as rise in pay and pensions. There could be no second opinion that the federal budget should measure to ensure rapid and sustainable economic growth, higher inflow of local and foreign investment and an improvement in agricultural and industrial production and exports, it is also necessary at the same time that the budget should provide relief, where it is due.

 

 

An overwhelming majority of the population in Pakistan (70 to 80 percent) currently lives on an average income of less than $2 a day, according to the World Bank statistics. In view of the price hike especially for the items of daily use, growing burden of indirect taxes and a high level of unemployment and under employment, the majority of the people are not prepared to accept what they called the tall claims of economic turnaround in the country because it is not reflected in their life.

It is the need of the hour to give a direction to the fiscal policy to bring down inflationary pressures besides ensuring price stability. Nature is kind to Pakistan that has given an excellent wheat crop this year, it is the responsibility of the caretakers that the benefit of the bumper crop should reach to the bottom line.

The government had recently allowed duty-free imports of livestock and vegetables from neighboring countries even before the announcement of the federal budget, in order to bring down the prices of meat, onion, potato, garlic and ginger etc. This was a timely step in the right direction and should be made a part of the budget.

In addition to price escalation, the common man was hard pressed under the unbearable burden of indirect taxes. The indirect taxation has reached a saturation point, further increase in this burden could prove the last straw on the camel's back. It is, therefore, high time for the government to examine how the burden of indirect taxes could be reduced to provide a breathing space to people belonging to the lower income categories. In conformity to the poverty alleviation agenda of the present government, it is high time that General Sales Tax (GST) on food items and medicines should be totally withdrawn. While a drastic cut to about 5 percent on utility bills especially helps the domestic consumers. In fact, the utilities should be used as a tax collecting agencies. How, many of the consumers can be liable to pay withholding tax incorporated in the utility bills is the question to ponder upon for our able economic managers.

Revenues provide fuel to run the government no doubt, however, their collection calls for a rational approach and creation of an enabling environment. Unfortunately, in our country campaign for collecting revenues is directed by the multilateral donor agencies that have no soft corner for the people whether they are capable to pay the taxes or not. This harsh policy of revenue collection has helped the collectors to surpass the target this year but at the cost of the peace of the people. Our economic and financial wizards will have to think twice before taking a decision for squeezing the existing tax payers instead of expanding the tax net by bringing down the huge untaxed income generated from agriculture sector in the country. This huge potential has been provided an umbrella of protection with the lame excuse that agriculture income is a provincial subject, while the big landlords sitting in the house legislatures would never like to bring agriculture income under the federally administered income tax regime.

The shortfalls in revenue as a result of these measures can adequately be made up if the governments concentrate on effective control of tax evasion. According to the latest estimates tax evasion had gone up to Rs300 billion. The total estimated value of smuggled goods into Pakistan through land routes from neighboring countries had gone up to over $6 billion per annum. By effective plugging of these holes, the CBR can achieve a sizable increase in its revenue generation.

While the federal budget is undoubtedly concerned with the economy, the ultimate aim of the government's fiscal policy should be to improve the living standard of the people, and to ensure a happy living free from economic pressures which is the key of harmony among the cross section of the people across the country.