ISLAMABAD: With the budget announcement for the next fiscal year just round the corner, the financial wizards of the Gilani regime seem uncertain on key issues that relate to increasing resources and checking annual wastage of hundreds of billions of rupees.
A glance into one of the lately prepared Finance Ministry presentations finds the economic managers of the country to have been unsure,
a) whether the Reformed General Sales Tax (RGST) would be enforced in the near future, b) if there is any hope for the immediate restructuring of the state-run enterprises that have cost the exchequer Rs300 billion this year, c) will the year 2011-2012 would be any different from the last three years where Rs650 billion have been paid from the taxpayers money as electricity subsidy as against investing such a huge amount on producing power, and d) how to benefit the poor when Rs250 billion annually is paid from national exchequer as subsidies on different items including petrol price to the advantage of the rich.
According to these documents, “The government will try to implement RGST, otherwise the government will work on removal of exemptions.” Accepting its failure to get the RGST implemented and unsure about its future, the Finance Ministry said that distortions from the existing GST system are being removed. “The government will continue this path as long as it does not succeed in putting in place RGST through parliament.”
The Finance Ministry documents show the government having the realisation as to where the things are getting wrong and how rich and affluent class of the society is getting benefits in the name of poor but there is no clear answer how to fix these problems.
The Finance Ministry documents admit that the government intends to help the poor and the marginalised through a series of welfare measures, and referred to subsidies offered but noted, “This all costs a lot of money. This year the government will pay Rs250 billion out of its pocket so that people of this country do not have to pay for higher prices.”
However, in the same breath, the Finance Ministry highlighted the grey area by saying, “But the problem is that a considerable amount of this Rs250 billion is consumed by rich people, large corporations and multinationals.”
“The government should only help the poor and the marginalised. Not the rich,” says the Finance Ministry document and underlined that it is important that the government should target its subsidies.
Then the ministry talked on subsidy on electricity and said, “Since 2007/08, we have paid more than Rs650 billion in electricity subsidy.” But warned immediately, “Imagine what we could have achieved had we increased the electricity prices and invested in amount of money in energy production.”
It adds, “Today people tell us that they are less worried about price per unit and more worried about loadshedding. But then some segments of the society create noise whenever the government thinks about raising electricity prices. Yes, we have line losses but those line losses require investment. We do not have money to invest to overcome line losses. Rich people in this country can afford much higher rate of electricity and sugar and wheat prices. They do not need government’s help. But the question is how do we target subsidies so that only poor and the marginalised can benefit?”
About the status of restructuring of public sector enterprises promised by the prime minister over two years back, the documents said, “The government intends to restructure the public sector enterprises before it decides on the issue of privatisation/disinvestment. On average more than Rs300 billion is spent each year on the public sector enterprises. These funds would have otherwise been used on investment and job creation on improving public services.”
Regarding the discouraging investments in Pakistan, the finance ministry documents admit, “Investments is discouraged when in a given money supply, the government borrows most of the funds and there is little available for the private sector. Also investments are discouraged when there are high interest rates in the economy.”
About the key failures of the government in over the past three years, it said, “The government allowed considerable amount of subsidy to the people at the cost of investments in the country and at the cost of jobs in the country. We tried hard last year to introduce RGST but could not do so.” It explained that the implementation of RGST would not have increased prices of milk, vegetables, wheat, rice etc. It would have allowed the government to better target the rich so that they could be caught and taxed. It also agreed that the process to reform public sector enterprises is slow.