PREPARATION FOR THE NEXT BUDGET BEGINS
Feb 27 - Mar 4, 2012
The government has started preparations for the next budget, which will be announced right in the middle of an election season. Dr. Abdul Hafeez Shaikh presided over the first meeting of senior officials of Ministry of Finance and Planning Division in Islamabad last week as an Advisor to Prime Minister on Finance and Revenues to finalise the budget strategy paper (BSP) for the financial year 2012-13
The BSP envisaging broad fiscal targets for the next fiscal year and the resource available is required to be approved by the president to trigger formal budget making process.
After presidential approval, the BSP will be required to be shared with the provincial governments, federal ministries and other institutions of the state for firming up next year budgetary projections before its presentation to the parliamentary committees.
Based on recommendations of the provincial governments, federal ministries and members of the parliamentary committees, the finance minister is expected to roll out BSP 11 that would be presented to the federal cabinet for approval and formal presentation in the parliament by May end.
The government is, nowadays, putting final touches to a strategy to win hearts and minds of hapless citizens as it appeared to be gearing up for the general elections.
The government is contemplating some populist measures before the polls to win over the poor voters while professional economists of independent thinking are not in favor of any such move as, according to them, the present deplorable economic condition cannot afford it unless new sources of generating additional revenues are found.
One of such moves being seriously considered is to pay the electricity bill of the poor consumers - up to 100 units-from Benazir Income Support Programme.
It appears almost certain that the economy will be a key factor in the coming general elections owing to the economic squeeze people have been experiencing for the last four years because of spiking food and energy prices, rising unemployment because of sluggish growth and industrial shutdown owing to electricity and gas shortages. Analysts agree that economic issues like ever rising prices of food items, petrol and petroleum products, medicines and other commodities directly affecting the quality of life are likely to influence and shape the voting pattern in the elections. But, they are of the opinion that a government that failed to undertake much-needed economic policy reforms in the first four years of its tenure, definitely cannot exhibit the foresight and courage to do so at the end of its tenure.
During the last four years, all the budget speeches of the successive finance ministers and targets set in the original budget documents repeated the monotonous mantra: the budget is pro-poor budget; has more allocations for development to look after the health, education and welfare of the people; and claims to effectively check corruption and tax evasion thereby raising the government revenues and so on. But, the problem remains that the actual outcome had no resemblance with the initial statements and objectives.
The coming budget is likely to maintain the traditions of being full of false promises but disappointing in its outcome.
The toughest task will be to reconcile its election promises of economic relief with ground reality of lack of revenue resources to increase spending on development and people welfare projects after meeting rising debt servicing and defense expenditures.
If the new government shows prudence and maturity and undertakes a serious and professional review of the state of national economy, it would come to realization that patch work will not work and a well coordinated and effective program is needed to save the economy.
The first priority should be to mobilize the real revenue potential and control ever-rising inflation through reducing its borrowing, checking middleman profiteering through strong administrative measures and drastically cutting all its unproductive expenditures. Under the prevailing circumstances, it is criminal to keep the income from agriculture out of tax net. This exemption should be withdrawn with immediate effect along with strong and effective measures to check all types of tax evasions and the rampant corruption in the tax collecting machinery.
According to experts, the tax potential in the country is about Rs6 trillion provided we tax the rich and mighty according to their ability to pay, revamp tax machinery and eliminate leakages and corruption.