Federal Budget – add to growing disparity!

On 27^th May 2014, London held a conference on “inclusive capitalism --- Building Value, Renewing Trust. Prince Charles, Bill Clinton, Christine Lagarde and many other business dignitaries spoke at the conference but conference’s takeaway was Bank of England governor Mark Carney’s speech, he said “we simply cannot take the capitalist system, which produces such plenty and so many solutions, for granted. Prosperity requires not just investment in economic capital, but investment in social capital.”

I tried to understand Pakistan FY15 budget through Carney’s lance and I have observed the following;

I will start with Mr. Dar’s claim that government has shifted its domestic borrowing from shorter to longer term papers. Indeed, this is healthy if done at lower rates but government shifted its portfolio on average at 2.40% higher interest. This will consume government’s half tax revenue in paying interest and it will not benefit poor, amid with falling interest rate national saving rate would decline. In short, a solution has sought for bank but the general public would suffer. This is perfect example of producing plenty for granted.    

Karachi-Lahore motorway is another major one, there is little doubt that road networks are important for economic growth. Government is aware of this fact and therefore allocated Rs. 25 billion in FY15 for purchase of land, during the last fiscal year government allocated Rs.30 billion for the same. Question is, how can you purchase land for a project without feasibility? Besides, if this project carries so much important, why first year’s land purchasing detail was not disclosed. This is billions of rupees project and benefits the granted the most.

Car assemblers’ interest has also been safeguarded in the budget. The three assemblers, who control Pakistani market, are fleecing customers by selling them twenty five year old designed car. The cheapest car assembled in the country is for Seven hundred thousand rupees; that who wants to buy pays full amount three month in advance, assemblers earn billions in interest and profits. Consumers’ losses time value of their money and gets obsolete technology; country looses foreign exchange for importing fuel for in efficiency. Despite all, government has given tax benefit to local assemblers and in fact indulges itself into what is called “agreement in restraint of trade”

Construction is another area, at present Pakistan is short of 8 million homes, this shortage increases every year by five hundred thousand. Yet the raw material prices i.e. cement and steel have been increased. On the other hand nothing included in the budget regarding prime minister housing scheme, which is well underway for a year now. A committee was formed for providing a housing policy, if government is serious enough why progress was not shared during the budget.

This list goes on, as far as BISF is concerned; let me remind it that it was a prerequisite for IMF loan program. The idea was that reforms prescribe by the fund would create hardship for the messes and therefore a social protection program was included in the agreement. The amount allocated for the years is no doubt higher, but this shows that life standard of messes is deteriorating, they live in misery and if present situation remains, the tally will increase further.

Fact is, basic human needs are the best businesses, be it education, health, safe drinking water, transportation, security, housing, finance etc. It is government duty to provide all these facilities to the messes. But even if provided by the private sector government creates regulatory frame work for. Alas! In our country governments, federal and provincials have failed to provide both. The present setup got little time last year to chalk out budget proposals though it seems nothing has been done for the messes.

In the end, if we are following an economic system, which is not working for the ones who created it, it will not work for messes either but as Carney has said that it serves well to granted, so the granted will ensure it survives, all other things are mere slogans……. Riaz Andy