Pakistan’s Budget Escaped the Attention of its Saviors!

The entire, almost the entire, international community has been expressing grave concerns about the economic stability of Pakistan. From the U.S. Congress to Friends of Pakistan, aid and assistance plans are being discussed and approved to keep Pakistan’s economy afloat. Earlier this week the U.S. Senate Foreign Relations Committee voted unanimously for tripling non-military aid to Pakistan to 7.5 billions over next five years. In the midst of all the “genuine” concern to address Pakistan’s economic woes, there has been almost no official response to or media coverage of Pakistan’s Budget presented before the National Assembly on 13 June. I understand that decisions about the Budget is the prerogative of the national governments, but given the fact that so much money is being poured into Pakistan by the international community in midst of a global financial crisis makes some knowledge about the country’s budget important.
Pakistan made history with this Budget. This statement has nothing to do with the substance of the budget proposals; it had more to do with form. For the first time in Pakistan’s history, the Budget was presented by a female Minister of the Government - Hina Rabbani Khar (Pakistan’s State Minister for Economic Affairs).

[Photo Courtesy: Brahma Chellaney's Website]
A few indicators of Pakistan’s current economic situation:
1. According to the recent Economic Survey Report of the Finance Ministry of Pakistan there has been a significant loss of growth momentum in the country’s economy during the past fiscal year. Real GDP growth in the outgoing year is estimated at 2%, compared to a revised 4.1 % in the previous fiscal year, with commodity producing sector recording a rise of only 0.2 % - the lowest since 1992-93. Gross fixed investment has decline substantially from 20.4% of GDP in 2007-2008 to 18.1 % provisionally in 2008-09, with a significant fall in investment by the private sector.
2. Public expenditure on Education as a percent to GDP has been lowest in Pakistan. The trend of investment on Education in terms of GDP has been 2.50% and 2.47% in the year 2006-07 and 2007-08 respectively whereas it is estimated to be 2.10% during 2008-09.
3. 46% of the labor force in Pakistan has one year of education or less. Female literacy rate is 43.6% and for males it is 68.2%. Unemployed labor force during 2007-08 is estimated at 2.69 million.
4. The main mode of health financing in Pakistan is public sector and 0.5% of its GNP is spent on health.
5. During the first nine months of the current fiscal year 2008-09, Pakistan’s total external debt increased from $ 46.3 billion at end-June 2008 to $ 50.1 billion by end-March 2009 — an increase of US $ 3.8 billion or 8.2 percent.
Highlights of the Budget:
1. The core budget of the federal government estimates net revenues of Rs. 1377.5 billion with a current expenditure of Rs. 1699.19 billion. The development expenditure (including Provinces) is estimated at Rs. 783.1 billion against the revised estimates of Rs. 421.9 billion, an increase of 85%.
2. The government made a commitment that it would pursue stabilization with a human face. Our tax and duty measures in Budget for Fiscal Year 2009/10 would revolve around the following concepts:-
3.Provide protection to the poor and vulnerable against the current economic
downturn;
a) Revive manufacturing and industry, especially export-oriented industry;
b) Broaden the tax base instead of overburdening the existing taxpayers; and
c) Restrain unnecessary imports to improve the Balance of Payment position.
4. As a measure to broaden the tax base The Government expects that the provinces would bring additional services into the net of sales tax and also impose capital gains tax on immovable property.
5. During the Fiscal Year 2009/10 real GDP is expected to grow by 3.3 percent and by 4 and 4.5 percent during Fiscal Years 2010/11 and 2011/12, respectively.
6. A targeted decrease in current expenditure to 15.3 percent of GDP in FY 2009/10 and 14.7 percent of GDP in 2010/11, owing to elimination of unproductive subsidies is planned in order to maintain the fiscal deficit at sustainable levels.
7. ‘Benazir Income Support Programme’, which seeks to provide cash transfers to the poorest of the poor, has been allotted Rs. 70 billion under the proposed Budget.
An allocation of Rs 35 billion is proposed for enhancing public utilities like electricity, gas and water supply.

Here are few reactions to the Budget posted on the Dawn Blog:
1. The prime minister has been allowed to spend Rs. 100 million every month on his foreign tours (which are entirely unnecessary). Every day, the nation pays each of its ministers Rs. 100,000, while the expenses on the president’s staff also amount to Rs. 100,000 per day. All this in a country where seven out of ten Pakistanis barely manage to survive on Rs. 160 (US$ 2) per day.
2. The important jolt of her speech was additional tax of 5% on the income more than 1000000/-. is it justified? We are already tax payers, what we are getting out of it?
3. Agricultural produce should not be taxed. By taxing the agricultural produce the farmers will stop growing food and they will sell their lands to the industrialists.
4. Pakistan should learn from Bangladesh. Since it does not have any obsession similar to Kashmir, its terms with India are friendly. As a result, it spends little on defense. Major part of its budget is spent on development. It has created a big export sector in textiles. From 1971, it has improved a lot today. Its per capita income is comparable to Pakistan’s. Among Pakistan, India and Bangladesh, the last one has lowest population growth today.
5. I still cannot understand why the defense budget was increased. The same amount could have been used to settle the IDPs. May be the defense budget has been increased to buy US armaments to give jobs to the American ordnance factories.
6. In coming days, our officials like beggars will be flying to different financial capitals to fill the 722 billion gap. I am not sure how much is the alms money already added into budget to meet day to day expenses, but it must be in hundreds of billions. We cannot meet our daily expenses and consider ourselves an independent country. Instead of begging, why our ruling elite do not bring their foreign assets back home.
7. Rich friendly budget presented by the Government. Astonishing. Poor man does not use a cell phone which can affect his Rs 6000 per month income. He needs bread and better living standard.
The Pakistani Government did what it is best at doing – fulfilling the minimal obligation of presenting the Budget, while letting the international community bear the obligation of ensuring the country’s economic survival. But what surprises me is that the international community has shown no interest in the economic plans of the world’s biggest economic liability. There has no discussion on how Pakistan is planning to utilize its resources, much of which is paid by the taxpayers in other countries. The international community has once again failed to hold Pakistan accountable for the generous aid it manages to wrestle through the threat of self-destruction.