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mtgondal · #58 Monday, June 04, 2007

Will it be a businessman or common man budget!

By Javed Mahmood

As the new budget is being unveiled this week for which the preparations are in the full swing, a half-hearted debate is going on in the business circles whether the FY-08 budget would be pro-business or pro-common man. Unlike past this time the debate and discussions concerning the upcoming budget entirely lack the eagerness and gusto as the businessmen and common people are more interested in the political and judicial scenario and very little in the forthcoming budget.
Although various business circles, chambers of commerce and trade associations have forwarded their demands for the new budget, the common man appears perfectly indifferent to the new budget and the promises and rhetoric of relief.
In fact, the present government has reduced the ambit of the budget merely to the fixation of economic targets, revenue mobilisation and detached the key items from the budget like petrol prices, electricity, gas tariffs and essential food items. The tariffs of energy sector are frequently being revised on different pretexts while the prices of essential consumer items have been left at the will of the market forces.
History of budget makings shows that till the regimes of Nawaz Sharif and Benazir Bhutto, the prices of petrol, electricity, gas, cement, cigarettes, sugar and some essential items were adjusted only in the budget. And frequent increase in the prices of key items through budget and mini-budgets often leads to a flurry of criticism against the government that used to be deterrence for the government for further premature change in the budget.
However, modification in the mechanism of budget making by the present regime has not only changed the pattern of mini-budgets, but also made common people indifferent to this annual exercise.
Before this crucial change in the framework of the budget making, the business community and common people used to sit before their TV sets in groups to eagerly listen to the developments in the budget. But this ecstasy has ended from the day the government has cramped the budget making to the fixation of the fiscal targets, including revenue mobilisation.
However, in the new budget the federal government faces the key challenges of containing deficits – fiscal deficit, trade deficit and current account deficit within the prescribed percentage of the GDP. Inflation is another area where the government would have to go extra mile to curb escalation in the food prices in FY08.
In FY07 the current account imbalance, fiscal and trade deficits would set a history by surging to the record high mark and this trend is expected to be noticed in the next financial year. The current account deficit has slightly exceeded $6 billion in 10 months (from July 2006 to April 2007) and it is expected to settle above $7b in this fiscal, as against $5.015b in previous financial year. The budgetary deficit in nine months of this fiscal has reached 272 billion rupees ($4.48b when calculated at Rs 60.71 dollar-rupee parity). The trade deficit in FY07 is also being estimated above $13 billion, from $12.20b in FY06.
It is yet to be seen as to what measures or strategies the federal government puts in place to minimize the burden of the deficits on the country.
Meanwhile, there are moments of rejoicing for the government. Because the inflow of foreign investment and remittances that are beyond the official projection and expectation in the current financial year that have enabled the government to bear the burden of trade deficit and maintain foreign exchange reserves near $14 billion.
In 10 months of FY07 remittances amounted to 4.477 billion dollars (from $3.618b in 10 months of FY06), showing strong signs of reaching close to six billion dollars or above this level that would be the highest-ever in a financial year.
Similarly, the foreign investment inflow has been estimated at 5.98 billion dollars in 10 months, July 2006 to April 2007, from 4.048 billion dollars, while the total inflow of foreign investment might surpass the mark of seven billion dollars for the first time.
It is expected that the government would make efforts to maintain the inflow of a hefty amount of remittances and foreign investment in the new budget.
Meanwhile, as the government officials are claiming relief for the common man in the new budget, one can hope that the three major problems of the people – rising food inflation; the worst-ever load-shedding and non-availability of potable water in big cities like Karachi and Islamabad would be given key attention.
So far despite billions of rupees expenditures, these three areas have badly exposed the competency of the policy makers. It is really pitiable that the countless inhabitants of Pakistan (that has shown impressive economic growth during the past three years) were grumbling about clean water, round-the-clock electricity and essential consumer items at affordable prices.
The shortage of electricity and potable water are two chronic issues being faced by a vast majority of the countrymen because of the poor planning and mishandled of these crucial issues.
In the coming budget the federal government has projected 520 billion rupees outlay for the Public Sector Development Programme. But will this bulky PSDP would resolve the basic problems being faced by the common man in the country is a question that strikes the mind of the common people.
Interestingly, Prime Minister Shaukat Aziz and his team have proudly pointed out repeatedly that per capita income of the country has increased to 845 dollars, but this drastic improvement in the per capita income is yet to change the fate of millions of countrymen who are looking for water, uninterrupted power supply and other social amenities.
Analysts say that instead of focusing mainly on revenue mobilisation the federal government should strive in real manner to bring a real change in the social life of the countrymen, especially those who lack access to basic amenities.