Challenging government’s approach of just focussing on spices for cooking budget, leading economists and chartered accountants have recommended the government to put some meat in the pot first.
Among other advices, they recommended the federal government to formulate a policy obligating provinces to spend 70 percent of their budgets for social services, preventive health and basic education, clean drinking water, water reservoirs and electricity production.
Talking to Pakistan Today, renowned economist Dr Qais Aslam said that the present government is depending upon the Keynesian short-run primary employment model, which means investing in mega projects, such as Metro Bus Service, in urban centres to boost employment for a few years, and also facilitate a boost of 1 to 2 percent growth rate by virtue of injections in the demand side, what we call a ‘trickledown effect’.
“This model is politically correct but economically not viable and sustainable,” said Dr Aslam, adding that the moment the projects end, unemployment kicks back in and growth rate comes falling down.
He said that instead of investing in such mega projects, the government can spend money on constructing schools, water reservoirs and other infrastructural facilities in rural areas.
“This will have a positive impact. Not only will it yield what currently is being desired of the metro project and enhance rural youth’s skills, it will be sustainable for a larger period of time. This is called the ‘trickle-up effect’ which means higher productivity of labour resulting in high profitability and growth,” he said.
The government claims that the growth rate has gone up to 4.2 percent and it envisages increasing it by 1 percent every year. Almost all the budgets, including the last year’s, are a fraud conceptually, he said, adding, “Deficits stand tall and the knife falls on the development sector; non-development expenditures are more than development expenditures,” said Dr Aslam.
“We are in a classical depth trap and very few allocations are for social sector or for the protection of environment. Presently, out of the current expenditure of Rs 2.54 billion, Rs 0.6 billion (2%) is being spent on Education Affairs and Services, Rs. 0.01 billion on Health Affairs & Services (Near 0%) and Rs. 0.0016 billion (an insignificant amount) on Social Protection.”
Dr Aslam said that out of the expenditure for social protection in the current expenditure, only Rs 481 million (28.4%) are allocated for other unspecified purposes in the social protection program and can be assumed that the discretion of the administrator is in favour of the needy and the helpless which might include poor women and home based workers, which comes to 0.01 per cent of the Federal Budget 2014-2015.
He added that on the revenue side, the targets are not met; indirect taxes are more than the direct taxes, putting pressure on the poor. The efficiency of every rupee spent is very low due to corruption, embezzlement and misuse of funds. Even funds allocated are not wholly spent where they should be spent. Therefore, the social and income effect of the budget on the mass of people is too little, said Dr Aslam.
RECOMMENDATIONS FOR FEDERAL BUDGET 2015-16:
Dr Aslam said in the upcoming budget it should be recognised that social and economic uplift of the country is now the task of the provincial budgets but the policy has to be put in place by the federal government.
Therefore, it is recommended that the share of the provinces is increased.
“The enhanced share should be on the basis of poverty alleviation and not on the basis of population. With the recommendation that the provinces will and should spend this enhanced amount on the social uplift of less developed areas like on basic education, skills, clean water, health of children and mothers etc,” he said.
WAR MEANS WAR:
He added it should also be recognized in the upcoming budget that Pakistan is fighting war on terror therefore; federal allocation of defense equipment should be enhanced.
Dr Aslam added that the pays of government servant and employees should increase but not in percentages. It should be increased through inverted slabs– in other words, larger increase to less paid employees and relatively less increase to highly paid individuals.
“It should also be based on better service delivery of the officers– in other words, higher the service delivery; higher the perks, lesser the service delivery; lesser the perks.”
SERVICING DEBT:
Moreover, largest amount of current expenditures of the government is spent in debt servicing which is 57 percent of the current expenditures.
“The government should negotiate a moratorium of three with the donors for not servicing this debt with a promise that money saved from this head would be spent on income enhancement of the poorer sections of the society and the youth,” said Dr Aslam.
SOME PARTNERSHIPS MAY BE?
Moreover, economist Imran Latif said that the federal government, through it public private partnerships, should concentrate on large and small dams and water reservoirs both for water conservation and electricity production for sustainable agricultural and industrial growth.
DIRECT TAX, DIRECTLY AT THE RICH:
“It is the constitutional responsibility of the federal government to protect the environment and the natural resources. From last few years, the federal government has not allocated any funds on this side. To save this country from droughts and floods in the future federal government has to seriously invest in environmental protection of natural resources,” said economist Meezan Khawaja.
She added that fiscal management is important on the revenue side; every rupee of the tax payer should have a 100 percent efficiency level. “Indirect taxes should be significantly reduced and direct taxes from the richer sections of the society should finance the federal budget– do not tax people below Rs 1 million line and apply progressive direct tax above that.”
Khawaja added that people with yearly income above Rs 100 million from all sources should be taxed at a rate of 50 percent which would ensure equity in distribution of wealth and bring rich people to tax net. “All developed nations of the world have tax ratio of between 52 and 58 percent,” she said.
Talking to Pakistan Today, Chartered Accountant Shahan Khan from Islamabad said that in the upcoming budget the government’s bank borrowing should be discouraged and electricity should be produced from domestic resources to avoid large trade deficit and debt because of oil imports. “It is recommended that the federal government should tax inputs to reduce cost of doing business instead should tax profit margins,” said Khan.
