FISCAL ADJUSTMENTS THROUGH FAIR INCOME DISTRIBUTION

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Jan 4 - 10, 20
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Employees of the government departments take the delay in implementation of recommendations from 'pay and pension commission' with heavy hearts. Under the recommendations, it was expected, there would be an exacting reduction of income inequality in the public sector organizations in addition to due revision in the remuneration by the beginning of January. However, government had extended the date of implementation to the end of this fiscal year. Federal government had set up the commission last year to recognize categories of employees with need of fiscal supports. A broad action was expected, yet government restrained itself to increase 15 percent salary of employees.

The sanctioned posts of all federal government employees were 4,09,711 and actual posts filled 3,58,130 for the year 2005-06, according to annual statistical bulletin of federal government employees. Of the total federal government employees, about 49.65 percent were domiciled in Punjab, 16.22 percent in Sindh, 23.25 percent in NWFP, and 3.1 percent in Balochistan. Overall, there are roughly around 3.4 million employees working in the public sector organizations.

In view of rising food inflation, it has become imperative for the government to revisit the pay scale of rank and file employees on war-footing. Reasonably, increase in salaries should be inflation-based. Prices of basic products are beyond the buying capacity of a large section of the population at present. There has been 100 percent increase in price of oil in international market, over 200 percent increase in price of palm oil, and over 150 percent of wheat since 2007, suggests poverty reduction and strategy paper II. Prices of rice, edible oil, fruits, vegetables, pulses, poultry, milk, electricity, gas, and transportation, etc. are on upward trajectory without a minuscule sign of decline. A low-paid government employee cannot afford the fees of quality education for his or her children. When it is not because of inflation, it is due to anemic governance. Price of sugar that has pierced through the roof notwithstanding the fact Pakistan is one of the top 10 sugarcane-producing countries in the world, is an example of bad governance. Just name any essential food products and you will find traces of administration's inefficiency in ensuring fair price. This mal administration aside, salaries of government employees distance the likelihood if low-income group consumes sufficient nutrition needed for healthy survival.

Inflation rate and pay scale stand at the two widely opposite points as inflation escalation does not stir the scale to go along with it. The outcomes are multifarious from increase in white color crimes, corruption to suicides or beggary. On one side, salaries are determined on an outdated formula and necessities of life are becoming off-limits to the masses. In particular, health allowances even for entry-level government employees are outlandish in view of mounting cost of medical expenses. A low cadre government employee gets Rs5,000 as medical allowance as a delivery expense. 'Medicines are free of cost. However, the allowance does hardly meet expenditures of normal delivery in private health centre let alone extra costs of complicated case or cesarean,' said a federal government employee.

Good health is not only important for developing resourceful society but also for making employees productive. State's responsibility is to ensure dispensation of health facilities to the society at large. Cabinet's approval of proposal recently forwarded by ministry of health for increase of 10 percent price of medicines will certainly put in danger the lives of low-paid persons. Manufacturers and trader of pharmaceutical goods have been demanding the government to allow them raise prices of medicines, but government perhaps found no reason for doing so because of the other incentives they were awarded. Now, there is likelihood that government would give them a green signal to revise upward prices of drugs on yearly basis. Government would itself however review prices of medicines administered for life-threatening ailments such as cancer, hepatitis, etc.

By reducing income gap of high and low cadre employees, government can create a space to revise remunerations without hurting fiscal adjustments. For some, monetization of facilities other than basic pay scales given to employees would be another way of fiscal adjustment. Commission also recommended government to phase out disbursal of in-kind facilities to employees and instead of perk and privileges, it was advised, government must pay cash to them. It is observed that high-paid government employees are given privileges such as car and fuel and travel allowances besides salary, whereas low scale employees could not even meet basic needs with the monthly salary. The stark difference becomes further unreasonable when it is seen along with the unfitness of highly paid employees to the designated job.

Despite the realization by the various governments of mismatch in demand and supply, no fiscal adjustment programs have been introduced so far to direct flows of public funds at the right place. An official document quoted an example that schools were constructed in far away from the main locality that implied under utilization of public assets. It is also applicable to public sector employees who are underpaid sometimes in contrast to their experiences and qualifications unfortunately most of the time they are paid for doing nothing. Ghost employees are a befitting example in this place. There is no record of total government employees getting salaries without attending their offices nevertheless one cannot deny the existence of ghost employees in various government departments. They are paid with immunity generally bestowed on them because of their political affiliations.

Government's objective of improving the standard of living of the people will be unattained if government does not make low-paid employees defendable to the inflation. According to an estimate, 3 to 10 basic pay scale employees constitute largest portion of the federal government employees. Critics say governments in different policy interventions focused only on poverty reduction and willfully overlooked fair income distribution. Income support program and Punjab food support program were the examples. Had the case been other way round, they believe, income inequalities in Pakistan would have been much low. There is relatively high-income inequality in urban areas of the country. Poverty incidence is high in rural section of the society however. It divulges the priority of the government that it allocated only 0.1 percent of GDP (July-Sep 2009) to superannuation and allowances and pension while 0.6 to defense affairs and services.

PERFORMANCE BASED BENEFITS ALLOWED TO EXPORTERS

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Benefits allowed to exporters by the State Bank of Pakistan on their export performance will also be applicable to those exporters who have achieved excess performance under Islamic Export Refinance Scheme (IERS).

Exporters who availed export refinance facility from more than one bank may submit their request for refund of mark-up rate benefit through any one bank to the respective SBP BSC (Bank), Office, supported by claim form duly authenticated/verified by each bank.

According to State Bank if an exporter is availing export refinance facility from more than one offices, he may not be deprived from refund of mark-up benefit provided that his consolidated borrowings as well as export performances fall under the instructions contained in SMEFD Circular No.06 dated March 09, 2009 read with SMEFD Circular No.15 dated October 31, 2009.

In such case(s), one SBP BSC (Bank), Office may furnish position of borrowings as well as export performances together-with claim form duly filled by bank(s)/exporter to other office of SBP BSC (Bank) and added The later office may work out the refund of mark-up rate benefit as per prescribed instructions. In case exporter's claim for refund of mark-up benefit found in order, the said office may allow benefit of mark-up through respective bank(s) and also inform position to other office(s) to enable them to allow similar mark-up benefit to exporter through respective bank(s) who have availed financing facility from them.

Moreover, refund claim of high performers will be considered within one year (i.e. up to June 30) from the close of performance period provided that exporter has no export overdue proceed at the time of submission of claim to SBP BSC (Bank), Office.