ISLAMABAD:
What we are up against are extraordinary economic challenges. A
traditional budget is not good enough. What we need is a budget with a
whole host of ‘out of the box’ features. What we have is a ‘standard,
conventional, customary budget produced, done, or used in accordance
with our long-established rather mundane traditions’. Being traditional
does not mean being bad.
Here’s what is good: The budget deficit, certainly the root of a hundred financial evils, is down. Down rather substantially-around 2 percent of GDP or a wholesome Rs500 billion. That means that the government would not have to borrow Rs500 billion and that means that the private sector would have Rs500 billion to invest. I hear that the Peoples’ Work Program I and the Peoples’ Work Program II, under which MNAs and Senators dole out billion-rupee programs, are on their way out. That is so good.
I like the tobacco tax and I wish it was a lot higher because we need to discourage some 25 million Pakistanis from taking out their next cigarette and cigarette kills more than 100,000 Pakistanis a year. I also like the beginning of the elimination of the SRO regime.
I like all the housing incentives wishing that the budgetary allocations were a lot higher. And I like the Rs63 billion for the Higher Education Commission.I also like how Ishaq Dar has reversed the trend whereby even Pakistani housewives had begun converting their rupees into dollars.
And I like how 3G/4G licences were auctioned off in a transparent exercise.What I didn’t like is tax, tax and more tax. There was hardly anything about expenditure control. The oil mafia continues to gulp down Rs400 billion a year. The State Owned Enterprises eat up an additional Rs500 billion. The Rs1.3 trillion PSDP has little monitoring and no direction. And our government’s so-called Commodity Operations cost us Rs100 billion a year every year.
What is totally beyond my comprehension is how the Ministry of Finance plans on collecting an additional Rs600 billion in taxes. What I do not understand is that how can the government expect to extract an additional Rs600 billion in taxes and still claim that our GDP growth will come in even higher. Oxymoron!
What I don’t like is the way the FBR collects taxes. Our industrial sector is 25 percent of our GDP and we extract 67 percent of taxes from the industry. Our agriculture sector is 21 percent of our GDP and we collect Rs1 billion in taxes. Our services sector is 55 percent of our GDP and no one knows how much is collected in the form of taxes.
What I miss the most is a growth strategy. The budget really does not have a growth strategy. The budget has failed to identify particular growth sectors. And the budget has failed to identify specific growth drivers.
Yes, the budget has mega infrastructure projects as growth drivers. That experiment is bound to fail — fail rather miserably. In 1930, America tried to come out of its depression via government spending on infrastructure. Eighty four years ago, America failed. In 1990, Japan tried to come of its recession via government spending on infrastructure. Twenty four years ago, Japan failed. Eighty five years ago, Einstein defined insanity as: “Doing the same thing over and over again and expecting different results.”
We will not be able to accelerate our rate of economic growth by starting multi billion rupee infrastructure projects. Economic growth is a byproduct of increased labour productivity or expansion. Labour productivity is dependent on education, efficiency and/or infusion of new technology. Alas, our budget has none of that.Our financial disease is not benign. At most, the Budget 2014-15 is an antibiotic. What we need is chemotherapy.
Here’s what is good: The budget deficit, certainly the root of a hundred financial evils, is down. Down rather substantially-around 2 percent of GDP or a wholesome Rs500 billion. That means that the government would not have to borrow Rs500 billion and that means that the private sector would have Rs500 billion to invest. I hear that the Peoples’ Work Program I and the Peoples’ Work Program II, under which MNAs and Senators dole out billion-rupee programs, are on their way out. That is so good.
I like the tobacco tax and I wish it was a lot higher because we need to discourage some 25 million Pakistanis from taking out their next cigarette and cigarette kills more than 100,000 Pakistanis a year. I also like the beginning of the elimination of the SRO regime.
I like all the housing incentives wishing that the budgetary allocations were a lot higher. And I like the Rs63 billion for the Higher Education Commission.I also like how Ishaq Dar has reversed the trend whereby even Pakistani housewives had begun converting their rupees into dollars.
And I like how 3G/4G licences were auctioned off in a transparent exercise.What I didn’t like is tax, tax and more tax. There was hardly anything about expenditure control. The oil mafia continues to gulp down Rs400 billion a year. The State Owned Enterprises eat up an additional Rs500 billion. The Rs1.3 trillion PSDP has little monitoring and no direction. And our government’s so-called Commodity Operations cost us Rs100 billion a year every year.
What is totally beyond my comprehension is how the Ministry of Finance plans on collecting an additional Rs600 billion in taxes. What I do not understand is that how can the government expect to extract an additional Rs600 billion in taxes and still claim that our GDP growth will come in even higher. Oxymoron!
What I don’t like is the way the FBR collects taxes. Our industrial sector is 25 percent of our GDP and we extract 67 percent of taxes from the industry. Our agriculture sector is 21 percent of our GDP and we collect Rs1 billion in taxes. Our services sector is 55 percent of our GDP and no one knows how much is collected in the form of taxes.
What I miss the most is a growth strategy. The budget really does not have a growth strategy. The budget has failed to identify particular growth sectors. And the budget has failed to identify specific growth drivers.
Yes, the budget has mega infrastructure projects as growth drivers. That experiment is bound to fail — fail rather miserably. In 1930, America tried to come out of its depression via government spending on infrastructure. Eighty four years ago, America failed. In 1990, Japan tried to come of its recession via government spending on infrastructure. Twenty four years ago, Japan failed. Eighty five years ago, Einstein defined insanity as: “Doing the same thing over and over again and expecting different results.”
We will not be able to accelerate our rate of economic growth by starting multi billion rupee infrastructure projects. Economic growth is a byproduct of increased labour productivity or expansion. Labour productivity is dependent on education, efficiency and/or infusion of new technology. Alas, our budget has none of that.Our financial disease is not benign. At most, the Budget 2014-15 is an antibiotic. What we need is chemotherapy.
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