PRE-BUDGET VIEW FROM ISLAMABAD

SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
June 04 - 10, 2007

The economic managers of the country are really burning midnight oils these days to finalize the proposals for 2007-08 budget which is to be presented before the National Assembly on June 9. Without leaking any exact information they are however, claiming that the coming budget would be investment friendly, business friendly, people friendly pro poor and providing sizable increase in salaries and pensioners of the millions of serving and retired civil servants and armed forces, even the most conservatives among them claim that the coming budget even if it could not change the fate of the masses, it would certainty mitigate the miseries of the common man.

President Pervez Musharraf has also addressed the concerned authorities and emphatically asked them that the coming budget should not only be pro poor it should appear to be so. He specially asked for strict measures to contain inflation. Being an election year the president also wants the coming budget should provide as much as possible increase in the salaries of public servant and relief to the fix income groups without resorting to additional taxation measures, CBR has been given a target of RS. One trillion for revenue collection for the next financial year against Rs.835 billion for the current (2006-07) year.

It is learnt that the Government has decided to provide relief allowance to the public sector employees both serving and pensioner, in coming budget, but their pay scales may not be revised employees for BPS 1 to 16 may get 20 percent and those in BPS 17 to 20 may receive 15 relief allowance from w.e.f 1.7.2007.

Reportedly the highest ever allocation of Rs.550 billion will be allocated for the Public Sector Development programme (PSDP) with special focus on projects creating more jobs. The government is to come up with an effective poverty assistance strategy in the forthcoming budget 2007-08 to by way of providing monetary relief to the most destitute and to this effect, Tanvir Ali Agha, Secretary Finance has stated that the allocation for Baitul Mal will be increased by 50%, from Rs.5 billion to RS. 7.5 billion.

The government is also to offer various schemes under the concept of private-public partnerships to generate self-employment for low-income groups across the country, with an emphasis on community development and rural infrastructure development schemes that will create assets for people living in rural areas. This is to be achieved by way of micro credit financing.

Mr. Agha has also said that Pakistan has one of the best, legal and enabling frameworks in the world for people who seek micro credit financing for running their businesses. Under the short-term strategy, the government will increase the outreach for providing micro finance to at least 3 million people. The longer term strategy of the government is to enhance this base up to 10 million people.

Government is expected to introduce housing programmes for low-income groups. Under this social housing scheme, federal, provincial, and district governments would provide land at government rates to the said targeted segment of society across the country with mortgage financing provided by banks and the House Building Finance Corporation. The government is currently strategising the equity participation and ratio levels for this. The government is claiming to aim to build about 200,000 housing units for low income people. Subsidies are expected to continue for ensuring the availability of cheap kitchen items with particular emphasis on ensuring the benefit of these subsides reaches those who need them most.

Despite claims from the government to check profiteering and hoarding, ground realities show that these checks have proved most ineffective with complaints in rises in the cost of ghee, flour, rice, milk, pulses, meat, vegetables and fruits. Factory and mill owners maintain that since the prices of electricity, gas, water charges and other utilities have been increased by the government they have no other option but to shift the burden to the consumers.

While part of the current inflationary pressures can be attributed to higher purchasing power and higher international commodity prices, this does not really translate into a general acceptance for those who just simply can't afford to feed themselves and their families, let alone to be able to afford schooling. Price control committees have proved themselves to be fairly inept at keep prices in check and what is needed is a balance between free market forces and effective subsidisation for those who need it most.

The government spending through the budget carries a potent weight in reducing the regional and rural urban income disparities. For each sector wise allocation, rural urban parity should be kept in view. The quality of education in the rural areas is extremely poor and with most colleges and universities located in cities and towns, rural students are at a greater disadvantage compared to the urban counterparts. Gradual elimination of these grass roots levels of the regional and rural urban disparities will go a long way towards improving regional economic balances.