Anjum Ibrahim
A budget document is an economic treatise of a government in power and in a democratic setup parliament passes it after considerable debate from other political parties with different (alternate) economic priorities with different strategies. In this country, the budget was passed after a mere 8 days of debate. The question is why? Was the budget 2012-13 of such excellent quality that no possible suggestions for improvements could be made? Or was there another reason for its quick passage?
There is little doubt in the minds of the general public as well as various political parties, within the coalition and in opposition as well as those outside parliament that the performance of the economy remains the Achilles' heel of the PPP government. The issues are so obvious that one really does not require the services of a competent economist to itemize them: they range from excessive loadshedding that has effectively downgraded the quality of life of Pakistani households, with the rich and the middle classes purchasing generators and UPSs at ever-rising rates, to the domestic and international erosion of the value of the rupee due to the government's massive increase in borrowing both domestically as well as from abroad (though the latter source is drying up due to failure to implement reforms), and a shrinking economy due to loadshedding and law and order problems leading to ever rising unemployment levels that cannot be documented accurately.
The budget itself, third year running, reflects a set of figures both in terms of expenditure allocations and revenue generation that are simply not credible - an opinion premised on the failure of the government to adhere to its budgeted current or development expenditure (with the former raised to provide untargeted subsidies particularly for inter-disco tariff differential and development expenditure mercilessly reduced to fund the former) or achieve its revenue generation targets (though the Federal Board of Revenue continues to be engaged in overstating revenue collection targets through a number of ways, some of which are under investigation by the Federal Tax Ombudsman). Can this year's overtly over-optimistic budgeted targets be any different? The answer has to unfortunately be in the negative given the fact that it is an election year and the government's coalition partners have demanded higher releases for parliamentarians, around 40 crore rupees per MNA given that the previous promise of 50 crore rupees per MNA did not materialise due to paucity of funds, a problem that remains and challenges the gullibility of the coalition partners in believing that the money would be released this time around. Those who maintain that this money, if released, would be targeted for development must keep two factors in mind. First the level of corruption in development projects, especially those on which third party audit is not undertaken, is in excess of 50 percent and second only those parliamentarians will be granted monies who support the government or in other words a form of pre-poll rigging will commence. Thus the budget was certainly not of good quality that it did not merit challenges. This probably explains why all coalition partners in the centre want to defer general election by as long as possible while the opposition parties are calling for immediate poll.
The fact that the PPP's coalition partners did not raise any objections to the budget is also inexplicable because MQM in its shadow budget supported tax proposals and expenditure measures that are not part of the 2012-13 budget including lower outlay on the military, more on power sector projects and taxing the rich and the influential. The ANP which has extended unswerving support to the PPP notwithstanding PPP's stance in Karachi lamented that the economic team did not take them into confidence or even bother to seek their views on the proposed budget. PML (Q) finally succeeding in installing Chaudhary Pervez Elahi as the Deputy Prime Minister supported the budget. Post budget passage the ANP, the MQM and indeed even the PML (Q) are saber rattling and insisting that the government release adequate funds to deal with the energy crisis, give development funds to their parliamentarians so that they can win seats in the forthcoming elections and of course resolve the Karachi law and order situation with MQM reemerging as a lead player in that city. Deals were struck before Raja Pervez Ashraf was elected and now one has to see if and to what extent they will be implemented.
The opposition PML (N) may well claim that it was busy protesting against a convicted Prime Minister Gilani and that engagement in the budget debate would have been tantamount to giving legitimacy to his cabinet. However, the party did not pass any cut motions and merely facilitated the passage of the budget, albeit indirectly. JUI (F) also claiming to be a party in opposition did present some cut motions but mysteriously withdrew them a day before the passage of the budget.
So who did benefit from the speedy passage of the budget? Hindsight is always twenty-twenty and those much enamoured of the President's political astuteness maintain that he cajoled his coalition partners to pass the budget speedily knowing full well that Gilani would soon be disqualified by the Supreme Court. This rationale does have merit if one looks at some critical dates: the budget speech was delivered on 1st June, the budget was passed on 14 June and Gilani was disqualified on 19 June. Perfect planning that can be credited to a wily President!
Supplementary grants were passed without demur which increased allocation for grants and appropriations from what was budgeted by 660 billion rupees thereby adding significantly to the budget deficit. Water and Power Division accounted for only 188 million supplementary grant with 17.5 million rupees for employees related expenses and 167.4 million rupees for operating expenses. Privatisation Division received a supplementary grant of 47 million rupees, inexplicable given that its output in terms of generating revenue from privatization remained zero. This money was spent on a propaganda campaign in favour of the Benazir employees' stock scheme which benefited only a little over 300,000 people. Defence Ministry under community development, for improvement of park opposite Cantonment board office Attock, received 10 million rupees. Development expenditure of professional and technical training division was 1.2 billion rupees and development expenditure outside Public Sector Development Programme (PSDP) was 47.5 billion rupees though the government noted development expenditure outside PSDP allocation increase of only 24.6 billion rupees in other budget documents reflecting the shoddy nature of the documents. No opposition to any of these grants was a disservice to the people of this country who elected the parliamentarians.
The Senate came up with 145 recommendations for the budget and the Finance Minister sanctimoniously stated that God willing he would incorporate most of them. However, in the final Finance Bill 2012 only 5 of the recommendations were incorporated and included (i) advance tax on sale of immovable property shall be adjustable and not collected in the case of federal, provincial or local government, and (ii) turnover tax reduced from 1 to 0.5 percent. The other recommendations were non-specific and in some cases the Senate simply was not aware that the recommendation has been a part of previous budgets as well as the 2012-13 budget. An example being suggestion 97: "The senate recommends that attractive support package maybe announced for investment in Balochistan". Recommendation 22 fails to recognize that it is in place and one of the reasons for the continued hemorrhaging of the economy, "the Senate recommends to the National Assembly that Food and Energy subsidy may be provided."
Ishaq Dar's recommendations, the PML (N) response to Dr Hafeez Sheikh were vague, non-specific and rather disappointing - none of which were adopted in the budget. These include "the government recommends to the national assembly that the federal government may stop forthwith loadshedding of gas and electricity for industrial units." He proposed enhancing subsidy on fertilizers from 26 to 50 billion rupees though this would almost certainly be in conflict with the recommendation to end loadshedding.
To conclude, the budget 2012-13 was unrealistic and some analysts maintain that it became irrelevant a day after it was passed and those responsible for its passage are the parliamentarians, including the PPP and its coalition partners, and those sitting on the opposition benches.
A budget document is an economic treatise of a government in power and in a democratic setup parliament passes it after considerable debate from other political parties with different (alternate) economic priorities with different strategies. In this country, the budget was passed after a mere 8 days of debate. The question is why? Was the budget 2012-13 of such excellent quality that no possible suggestions for improvements could be made? Or was there another reason for its quick passage?
There is little doubt in the minds of the general public as well as various political parties, within the coalition and in opposition as well as those outside parliament that the performance of the economy remains the Achilles' heel of the PPP government. The issues are so obvious that one really does not require the services of a competent economist to itemize them: they range from excessive loadshedding that has effectively downgraded the quality of life of Pakistani households, with the rich and the middle classes purchasing generators and UPSs at ever-rising rates, to the domestic and international erosion of the value of the rupee due to the government's massive increase in borrowing both domestically as well as from abroad (though the latter source is drying up due to failure to implement reforms), and a shrinking economy due to loadshedding and law and order problems leading to ever rising unemployment levels that cannot be documented accurately.
The budget itself, third year running, reflects a set of figures both in terms of expenditure allocations and revenue generation that are simply not credible - an opinion premised on the failure of the government to adhere to its budgeted current or development expenditure (with the former raised to provide untargeted subsidies particularly for inter-disco tariff differential and development expenditure mercilessly reduced to fund the former) or achieve its revenue generation targets (though the Federal Board of Revenue continues to be engaged in overstating revenue collection targets through a number of ways, some of which are under investigation by the Federal Tax Ombudsman). Can this year's overtly over-optimistic budgeted targets be any different? The answer has to unfortunately be in the negative given the fact that it is an election year and the government's coalition partners have demanded higher releases for parliamentarians, around 40 crore rupees per MNA given that the previous promise of 50 crore rupees per MNA did not materialise due to paucity of funds, a problem that remains and challenges the gullibility of the coalition partners in believing that the money would be released this time around. Those who maintain that this money, if released, would be targeted for development must keep two factors in mind. First the level of corruption in development projects, especially those on which third party audit is not undertaken, is in excess of 50 percent and second only those parliamentarians will be granted monies who support the government or in other words a form of pre-poll rigging will commence. Thus the budget was certainly not of good quality that it did not merit challenges. This probably explains why all coalition partners in the centre want to defer general election by as long as possible while the opposition parties are calling for immediate poll.
The fact that the PPP's coalition partners did not raise any objections to the budget is also inexplicable because MQM in its shadow budget supported tax proposals and expenditure measures that are not part of the 2012-13 budget including lower outlay on the military, more on power sector projects and taxing the rich and the influential. The ANP which has extended unswerving support to the PPP notwithstanding PPP's stance in Karachi lamented that the economic team did not take them into confidence or even bother to seek their views on the proposed budget. PML (Q) finally succeeding in installing Chaudhary Pervez Elahi as the Deputy Prime Minister supported the budget. Post budget passage the ANP, the MQM and indeed even the PML (Q) are saber rattling and insisting that the government release adequate funds to deal with the energy crisis, give development funds to their parliamentarians so that they can win seats in the forthcoming elections and of course resolve the Karachi law and order situation with MQM reemerging as a lead player in that city. Deals were struck before Raja Pervez Ashraf was elected and now one has to see if and to what extent they will be implemented.
The opposition PML (N) may well claim that it was busy protesting against a convicted Prime Minister Gilani and that engagement in the budget debate would have been tantamount to giving legitimacy to his cabinet. However, the party did not pass any cut motions and merely facilitated the passage of the budget, albeit indirectly. JUI (F) also claiming to be a party in opposition did present some cut motions but mysteriously withdrew them a day before the passage of the budget.
So who did benefit from the speedy passage of the budget? Hindsight is always twenty-twenty and those much enamoured of the President's political astuteness maintain that he cajoled his coalition partners to pass the budget speedily knowing full well that Gilani would soon be disqualified by the Supreme Court. This rationale does have merit if one looks at some critical dates: the budget speech was delivered on 1st June, the budget was passed on 14 June and Gilani was disqualified on 19 June. Perfect planning that can be credited to a wily President!
Supplementary grants were passed without demur which increased allocation for grants and appropriations from what was budgeted by 660 billion rupees thereby adding significantly to the budget deficit. Water and Power Division accounted for only 188 million supplementary grant with 17.5 million rupees for employees related expenses and 167.4 million rupees for operating expenses. Privatisation Division received a supplementary grant of 47 million rupees, inexplicable given that its output in terms of generating revenue from privatization remained zero. This money was spent on a propaganda campaign in favour of the Benazir employees' stock scheme which benefited only a little over 300,000 people. Defence Ministry under community development, for improvement of park opposite Cantonment board office Attock, received 10 million rupees. Development expenditure of professional and technical training division was 1.2 billion rupees and development expenditure outside Public Sector Development Programme (PSDP) was 47.5 billion rupees though the government noted development expenditure outside PSDP allocation increase of only 24.6 billion rupees in other budget documents reflecting the shoddy nature of the documents. No opposition to any of these grants was a disservice to the people of this country who elected the parliamentarians.
The Senate came up with 145 recommendations for the budget and the Finance Minister sanctimoniously stated that God willing he would incorporate most of them. However, in the final Finance Bill 2012 only 5 of the recommendations were incorporated and included (i) advance tax on sale of immovable property shall be adjustable and not collected in the case of federal, provincial or local government, and (ii) turnover tax reduced from 1 to 0.5 percent. The other recommendations were non-specific and in some cases the Senate simply was not aware that the recommendation has been a part of previous budgets as well as the 2012-13 budget. An example being suggestion 97: "The senate recommends that attractive support package maybe announced for investment in Balochistan". Recommendation 22 fails to recognize that it is in place and one of the reasons for the continued hemorrhaging of the economy, "the Senate recommends to the National Assembly that Food and Energy subsidy may be provided."
Ishaq Dar's recommendations, the PML (N) response to Dr Hafeez Sheikh were vague, non-specific and rather disappointing - none of which were adopted in the budget. These include "the government recommends to the national assembly that the federal government may stop forthwith loadshedding of gas and electricity for industrial units." He proposed enhancing subsidy on fertilizers from 26 to 50 billion rupees though this would almost certainly be in conflict with the recommendation to end loadshedding.
To conclude, the budget 2012-13 was unrealistic and some analysts maintain that it became irrelevant a day after it was passed and those responsible for its passage are the parliamentarians, including the PPP and its coalition partners, and those sitting on the opposition benches.
