BUDGET LACKS VISION
June 13 - 19, 2011
The Budget 2011-12 presented by Finance Minister Dr Abdul Hafeez Sheikh in the National Assembly has not only 'disappointed' the opposition but also failed to get any positive response from the business circles.
The opposition leaders claimed that the incumbent government lacks 'will' and 'vision' to address sufferings of the people and to put the country on the path of self-reliance, which is key to overcome economic crises. Steps announced in the budget seems like deviation of the PPP government from its slogan of 'roti', 'kapra' aur 'makan'", they said.
The government is all set to make heavy borrowing to bridge budget deficit that would lead to increase in inflation rate from 15 percent to 25 percent thus rendering all Pakistani merchandise uncompetitive in the global marketplace due to high input cost.
According to the Lahore Chamber of Commerce and Industry (LCCI) Senior Vice President Shaikh Muhammad Arshad, the federal government once again maintained its discriminatory attitude towards Punjab in the federal budget 2011-12, as out Rs122 billion amount allocated for subsidy to be provided to the distribution companies, not a single penny would be given to the electricity distribution companies in Punjab.
The KESC alone would get a subsidy of Rs24 billion while among the Power distribution Companies (Discos) three major Punjab-based Discos including Lesco, Fesco and Gepco would not receive even a single penny relief from total subsidy of Rs122 billion.
He said the government has failed to give any economic revival plan in the budget, while mainly focusing the international monetary agencies' instructions and ignoring the proposals of the local trade bodies and other stakeholders.
Sheikh Mohammad Arshad said that the budget could in no way help achieve the proposed GDP growth target of 4.2 percent, as it seems that the document is prepared in haste. Despite having knowledge of the gravity of the situation, the federal government has allocated meager amount of Rs18 billion for new dams and water reservoirs, he added.
According to him, budgetary framework is unrealistic both in terms of targets and resource mobilization. Budget estimates are routinely out of focus and thus often missed by wide margins. Fiscal deficit is expected to be in the range of 5.5-6.5 per cent of GDP as against the revised target of 5.4 per cent. FBR collected only Rs.1,310 billion in July-May period of 2010-11 against the revised target of Rs1, 588 billion despite imposing additional taxes worth of Rs53 billion in March.
He said the revenue target of Rs1778 billion for 2010-11 was ambitious. Inflation target is also missed mainly because of the impact of large fiscal deficit. Flood-related supply shocks also fed inflationary pressures. Inflation was 14.1 per cent in July-April period of the current fiscal year as against the 9.5 per cent target.
Inflation is expected to be around 15 per cent this year. In view of the low growth prospects, we believe that the revenue collection for FY12 would be between at Rs1699 billion to Rs1750 billion instead of the Rs1952 billion set by the government, he added.
Business-cum political leader Mohammad Pervaiz Malik MNA said the budget highlights nothing on incentives for generating economic activity and creating employment in the country.
According to him, the budget 2011-12 is gimmickry of words that lacked sufficient relief measures for the poor segment. In the budget document, a lot of things had been kept hidden and people had to face much hardship ahead. Nothing concrete and consolidated proposals could be seen in the budget. The government should have taken stock of the problems of the poor.
He said the PPP-led coalition will not be able to redress the problems of the masses who are the worst victim of skyrocketing price hike, unemployment, poverty and terrorism. The government was not sincere to resolve the problems purely pertaining to public and is following IMF dictates blindly.
Muttahida Muslim League leader Humayun Akhter Khan in his reaction said that no pragmatic steps have been announced by the government to create job opportunities and provide relief to the masses. He said the industry requires smooth supply of gas and electricity but it is suffering on account of gas shortage.
He said the government needed to facilitate the businesspersons. He was of the view that there should not be any cut on Public Sector Development Program (PSDP), as cut in PSDP leads towards depriving people of job opportunities besides hitting hard to economic activities.
On the other hand, Chairman All Pakistan Textile Mills Association (APTMA), Gohar Ejaz appreciated the government for focusing on brining more people to the tax net, while maintaining status quo on tax structure.
According to him, the tax to GDP ratio of nine percent is worrisome and there is an urgent need of a better enforcement mechanism. More focus on tax collection is the best solution.
He also expressed his satisfaction over government's focus on PSDP, allocating Rs730 billion with Rs60 billion for energy projects, and pointed out that more allocations are needed to meet existing energy shortfall in the country.
He said the textile industry was running its operations with 43 percent curtailment both on electricity and gas supplies and the government should exempt industry from load shedding on both ends. He urged the policymakers to sit down with textile industry to chalk out energy policy for the industry ahead.
Mr. Gohar said the textile industry has registered 40 percent growth during outgoing fiscal year, adding $4 billion to exports comparing with last fiscal. It may be noted that the textile exports have reached to $14 billion during 2010-11 against $10 billion during 2009-10. He said the textile industry has also benefited cotton farmers with the availability of free market mechanism in the country and a total of Rs900 billion is being injected to the cotton economy during last three years.
Growers' organizations representatives have termed the proposed budget for the year 2011-12 imbalance and expressed their astonishment that nothing is mentioned about the agriculture sector in the speech of the federal finance minister.
They termed the budget as anti-farmers and said the government could have generated more money if it had consulted farmers before making the budget. The levy of GST on agriculture inputs including fertilizer and pesticides led to increase in production cost of farmers by Rs4000 per acre. This unwise step would mean at least 10 per cent reduction in production of crops, they added.