COMMENT
Waiting for DIVINE INTERVENTION----------

Qudsia Kadri
Thursday May 3 2007

As the Budget 2007-2008 approaches, the activities of concerned departments and Islamabad increases. This renewed energy is sadly seen every fiscal year around this time before the budget is announced. The issues facing the economy are several and even the fruit vendor around the corner is aware of what ails our economy. We have been penning down our thoughts and recommendations over the past few years, but obviously our financial wizards advising the prime minister on all financial matter's do not deem it necessary to pay any heed to the voice of the faceless man on the streets, the man whose frail shoulder's cannot further carry the burden of poverty, deep-rooted unemployment and an everyday rise in inflation.
The on going squabble about the extent of poverty and the often referred to 'poverty has gone' statement is mind boggling to say the least. To the majority inhabiting this land, it is irrelevant whether people living below the poverty line (less than 1$ per head a day) is 40% or higher. To them there has been no dramatic change or increase in the pro-poor expenditure to make a difference in their lives. The promised goods before every budget announcement of access to free education, health facilities and access to medical center's in the villages, the rural support programs, reforming the irrigation, availability to clean drinking water, sanitation are all like a fairy-tale or dream to the masses.
The development expenditure has remained below target's so that availability of services remain short. Pakistan's economy today faces an unequitable distribution of wealth, which in turn is depriving the masses from sharing the benefits of high growth. To keep referring to the rhetoric of high growth will not just resolve the present economic scenario.
The allocation of funds to the public sector development program (PSDP) was around Rs. 272 billion in the last budget. But unfortunately, what we have been stressing upon over the years, is that how much of PSDP was actually utilized and a sectorial report of all new developmental projects initiated must be put for public review and scrutiny. We want to know how much of the foreign remittances have like in the years before, gone into non-productive sectors like the stock-market and real estate.
Last fiscal year it was reported that 80% of the additional national income created in the recent years has gone to only 10% or so of the population. Super profits from speculation in shares and real estate is and shall never be a substitute for general economic prosperity. Neither did we see the tax to GDP ratio improving nor any substantial increase in development works.
Coming back to the steady increase in inflation, we have seen a contradiction between the fiscal policy of the government and monetary policy of the state bank. Even during the last fiscal year (2006-2007) we saw federal and provincial governments incurring massive non-development expenditure. New imported mercedes cars for the VIP's, more than frequent foreign trip's with a growing entourage of irrelevant members of the cabinet, lavish dinners have all become a hallmark of the government expenditure. Hence, it is hardly suprising than that the budget deficit has gone much beyond the limit and borrowing from the SBP has crossed the ceiling. Coming to the monetary policy, we find it has remained expansionary.
The consumer credit extended in the previous years has left it's overhang. The cars are being sold at a premium, the constant rise of food items and here we are talking about bare nessicities of everyday use______ sugar, wheat, pulses, rice etc have become steep. Even the weekly Friday and Sunday bazaar's give no respite in prices to the growing poor and diminishing middle-class consumer. The purchasing power of the majority is rapidly declining. And of course unemployment has increased. We refuse to accept the claim of the government that jobs have been created.
Massive growth in the value of real estate and stock market shares are not "Real Investments" in the productive and growth orientated economics of the world. We write here about, the new factories and industries, which have not been set-up during the past few years. Only when business house's are set-up that new jobs are generated, only when investment is created, or existing institutions are expanded that new employment replaces unemployment.
Yesterday it was reported that the commerce ministry was meeting to try and solve why exports from the country have gone down even after the textile sector was given an assistance of about Rs. 15.4 billion. And the surprising question, which has arisen, is how foreign remittances have increased when exports have gone down. The ministry should present a detailed report for the people to know what is happening in the textile sector.
The budgetary preparations have started with the Prime Minister announcing a rise in pay and pension in the coming budget. The increase in foreign exchange reserves, the infrastructure development, the rationalization of tax rates, the energy security (which must be an absolute priority as the energy crises in the country and in Sindh is heading towards a complete crisis and breakdown), the reduction and rationalization of tax rates so as to bring more sectors of the economy into the tax net in order to enhance the overall tax base and tax-to GDP ratio, all should be on the minds of our budget makers. They must also concentrate on neglected sectors, such as electrification in villages, gas supplies, education, health facilities and clean drinking water being accessible to all________ rural villages as well as urban cities.
Unless immediate measures are taken to contain the growing disparity between the 'Have and the Have-nots, we are going to face the biggest backlash from the masses.
A country already ridden with political divide, judicial crisis, external pressures and belligerent-neighboring state's cannot afford an economic slow down and neglect a pro-poor 2007-2008 budget. Unless our economic planners wake up-to reality and pull themselves out of the self inflicted euphoria or major memory lapses (Alzeimer's ??) and get their house in order before June 2007, let us have no illusion's of a Divine Intervention. The lord, 'helps only those who themselves' is a dictum we cannot afford to forget.