PEOPLE ARE WAITING FOR RELIEF
It is also thought by some circles that government policies are fuelling inflation which has become a major concern these days
By KHALIL AHMED
May 29 - June 04, 2006
Forthcoming Federal Budget 2006-07 will be people-friendly with a focus to provide more relief for the common man PAGE learnt from well placed sources. It is expected that the budget would be investor-friendly as well since our country needs to attract huge foreign investment which would strengthen our economy. So it could be presumed that the local and the foreign investors must be eyeing the new budget which is to be unveiled on June 07. It is a tradition that the month of May generates lots of activities in terms of the forthcoming budget every year. These activities comprise I-pre-budget debates, which at times are fiery debates, ii-seminars conducted by various organizations, institutions and political parties to get their messages/ proposals across, iii- rallies etc. It is also thought that the suspense of budget hampers business activities at times and promotes the speculation environment.
It is also thought by some circles that government policies are fuelling inflation which has become a major concern these days. And some people point out the lackluster performance of our economy. I personally believe that it is indeed commendable to see that even after the 8th October earthquake and soaring oil prices in the international market, our economy is growing at around 6% and per capita income of $800 is projected during the current fiscal year. Though we could not sustain the 8.4 percent growth of the last fiscal year like our neighbouring countries namely India and China which have had sustained growth over the period of time, yet our performance could be termed satisfactory considering the tough times faced by the economy. We must not forget that our economic growth of the last fiscal year was higher after China among our neighbouring countries. Undoubtedly, soaring inflation is a big concern and it is the duty of the concerned officials to look into the matter sooner rather than later to provide relief to the common citizens.
I suppose everyone is waiting to see the endeavors made by the government regarding reforming the tax system, controlling inflation, attracting Foreign Direct Investment, reducing unemployment and poverty, and bringing the cost of doing business down.
The concerned officials claim that government is considering various taxation measures to eschew impediments regarding the investment which would ultimately result in more production thus creating employment opportunities for both the unemployed and the underemployed.
It is widely observed that the burden of revenue collection passes on to the poor through indirect taxes. It would be a nice step by the government to reduce the sales tax which would directly help the consumers. Some sources suggest that the sales tax be reduced from 15 per cent to five per cent, however, I suggest if that is not viable in the mean time, it should not be more than 10 percent. Along with GST, other taxes are supposed to be reduced incase the government is determined to provide relief to the grass roots. I agree that soaring oil prices are a major concern for all economies in the world but in our country it is believed that government charges 50 percent tax on the petroleum products which is beyond the affordability of the masses. I would like to mention the trade deficit over the period of first nine months of the current fiscal year which stands at about $ 8 billion. The major contributors to the deficit are petroleum products (41%) whereas the contribution of the consumer durables to the deficit is merely 9.2 percent. I would like to mention also that one unit electricity production by oil costs about 6 to 7 rupees whereas the same production would cost merely 50 paisas incase produced by water. It is also quoted that there are two vital reasons for high inflation in our country: high oil prices, higher food prices. We as an agricultural country import food products from abroad. It is said that we import edible oil because our farmers are more inclined to producing cash crops: wheat, cotton, sugarcane etc. Well, if it is so then why are we confronting high sugar prices and wheat flour prices? Food inflation believed to be in double digits is putting colossal burden on the majority of the population and particularly on over 25 percent population living in poverty in our country. Official sources believe that our industry sector and service sector will grow around four to five times more than agriculture sector in next four to five years. This does not mean that agriculture is a dying sector with which over 40 percent of our workforce is associated for its livelihoods and this is the sector which contributes over 20 percent to our GDP. The government needs to use automation technology following the trends of the Brazilian agriculture sector which would help in higher production and reduction in poverty simultaneously. According to a foreign source 33% population in Pakistan lived under the poverty line in 2003. Though the poverty ratio at present is around 25 percent, yet the government needs to tackle this issue with priority and that is to be seen in the forthcoming budget.
Along with all these issues, one of the major issues is the allocation of the budget for the sectors which are more productive. I think education sector is one of these sectors. It is being said that the education budget would be increased from 2.7 percent to 04 percent. It was very nice to hear that the President and the Prime Minister recently announced 50% increase in the education budget. It is to be remembered that India increased its education budget by 50% in 1998-99 budget and it is expected that in the next budget there will be 31.5 per cent increment for education. India intends to induct 1.5 lakh additional teachers.
India has over 60 percent literacy rate and 93% of Indians are not able to progress beyond secondary school. Education brings about social transformation and it is to be seen what our government is going to do as far as this very important sector is concerned. I would suggest that the government should increase funding particularly to promote technical education in the country which would help our economy in the long run.
Now let me discuss a few proposals by some sources.
i-One source proposed austerity in government spending and 100 percent increase in salaries of the government employees. I think it is an excellent suggestion which has been extended perhaps keeping in mind the rising inflation.
ii-The Institute of Chartered Accountants of Pakistan (ICAP) suggested that the foreigners who come to Pakistan should be required to pay their hotel bills in foreign currency which could be a great source of foreign exchange earnings for our country. I feel it is quite appealing suggestion and would be fruitful if implemented.
iii- A substantial amount is allocated for the disaster management keeping in view the recent earthquake tragedy. I think we should have done it long before but even now it is not too late.
iv-One more proposal says insurance cover be provided to the taxpayers to attract the potential taxpayers. I suppose we need to create a culture where citizens should feel proud in paying taxes which eventually helps them at the end of the day.
The budget should be chalked out in such a way that there are attractive avenues for the foreign investment, there is plan to promote export-led sustained and vigorous production which would help earn revenue and control unemployment ,and there should be less burden of taxes on the poverty-stricken citizens of this developing country.