ISLAMABAD - The PPP-led government presented its fourth federal budget on Friday without a single concrete measure to overcome energy crisis, price hike or unemployment – the major problems facing the country.
A routine set of figures were unveiled in the National Assembly amid persistent noises by the opposition, including some erstwhile allies, who chided the government for being devoid of any future vision to better the economy or reduce the country’s dependence on foreign assistance, which many say should have been the top priority at a time when donors are reluctant to open their purses because of the poor credibility of the rulers.
Amid intense sloganeering, a trusted aide of former military ruler Pervez Musharraf, bespectacled Finance Minister Dr Hafeez Sheikh unveiled the federal budget for the fiscal year 2011-12 with an outlay of Rs 2.76 trillion (up 14.2 percent) and a deficit of Rs 850 billion that makes 4 percent of the GDP. The actual deficit during the next financial year would amount to Rs 975 billion whereas the government anticipates a surplus of Rs 125 billion from the provinces to limit the deficit to Rs 850 billion.
In a step likely to affect the common people the most, the federal government has decided to cut subsidies, or the relief for the masses, on various items to Rs 166.5 billion for 2011/12, compared to Rs 395.8 billion last year (down Rs 229.3b). In the budget document, the government included grants and transfers of Rs 295 billion under the subsidies head, which could at best be called a deliberate error to cover the cut in subsidies.
Analysts believe this step alone would cause another wave of hike in the prices of edibles and other essential commodities, providing ample political ammunition to the impatient opposition to mount pressure on the government to quit.
On the other hand, the minister announced an increase in the pays and perks of state employees and pensioners. He said government employees would get a pay raise of 15 percent while pensions would also go up by 15 to 20 percent. This measure would cost the government Rs 25 billion of the current expenditures.
Hafeez announced that the government also proposed a 25 percent increase in conveyance allowance for government employees up to grade 15, including armed forces’ employees. He said that there is also a proposal to increase all allowances of the government employees up to grade 15 by merging their 50 percent ad-hoc relief into pay scales granted last year.
He announced that the current expenditures during the financial year starting July 1, 2011 would amount to Rs 2.315 trillion, which with the addition of development budget of Rs 452 billion would make the total federal outlay of Rs 2.767 trillion.
A hefty amount of Rs 1.034 trillion has been earmarked for debt servicing, with Rs 791 billion for interest payments and Rs 243 billion for repayment of foreign loan.
Allocation for the defence affairs and services is Rs 495 billion (compared to Rs 442 billion last year) while another sizable amount of Rs 96 billion goes to the pensions for the retired employees of the armed forces.
An amount of Rs 203 billion has been earmarked for running of the civil administration, with lion’s share going to the security sub-head.
The finance minister claimed that the government has proposed no new tax except for the withdrawal of all exemptions given on the General Sales Tax. He also sought to boast about one percent downward revision of GST from 17 percent to 16 percent that was enhanced last year for flood relief. This step would cause a loss of Rs 35 billion to the FBR. Value-added tax on commercial importers has however been increased.
With downward revision of one percent in GST, the minister announced the government would do away with all the special excise duties in the next couple of years as it has abolished 395 of them in addition to abolishing the flood tax.
Similarly, he announced that the government has also increased the taxable income threshold from Rs 300,000 to Rs 350,000 in order to provide relief to the low-income people. This would cause a loss of Rs 800 million to the FBR.
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What are your thoughts on the budget? As stated, GST is revised one percent, but subsidies have been slashed by such a large amount. Are they paving the way to a revolution? As it is, basic edibles are so expensive that crime rate has gone up. There are stories of household servants kidnapping kids for ransom, the situation is already dire enough. What are the positives you see in the new budget? And the longterm implications?
