Daily Times

Try bringing a change in any institution without first changing laws and without ensuring that these laws are being followed across the board; the result would be chaos and failure. Governance is all about ensuring effective delivery of service through constant improvement in performance. The budget is a reflection of the performance of a country during the year and its future plan based on it. It is like the profit and loss statement of a country that indicates how well it is doing on its key performance indicators. Any organisation that continuously shows losses will not be sustainable. Such entities resort to borrowing and the borrowing always is not just expensive but highly conditional to the borrower’s demands. That is exactly what Pakistan is going through. Every year the country fails to earn more than it spends and every year the country has to borrow more to pay off earlier borrowing. How can this vicious cycle change? The answer seems logical: bring reforms that curtail expenditures and improve receipts. How can that be done? By identifying unnecessary expense and enhancing the revenue generation system. Simple but almost impossible. Why is it impossible? Mainly because it will require an admission on the part of our leaders that they themselves need to reform their mindset, their lifestyles and habits to really set the example and tone for serious business.

It is evident that each year budget making is a template filling ritual that is done routinely and ruthlessly. The most important part is to develop a vision and purpose statement of the budget and then align every allocation in line with that purpose. For example, if the purpose statement says that we want a budget that focuses on the poor, human development and reforms then all projects, subsidies and taxes should reflect this focus. That is what is the biggest difference with template filling and beginning with a vision and purpose exercise. We have all acknowledged that our core problems are energy, employment, education and shortage of resources. Every government, before coming into government, talks about reforms and puts a great deal of emphasis on these as pre-requisites of taking the country out of crisis, especially in their manifestos.

The PML-N won the elections talking about the energy crisis and their manifesto identifies that the energy crisis is due to the corruption and inefficiency of the GENCOS, circular debt and inefficient DISCOS. Reforms and restructuring are suggested for all of them. However, if we see the three budgets that have been presented so far very little energy reforms are visible and thus the energy crisis has worsened. Circular debt of Rs 480 billion that was settled without a pre audit has again mysteriously accumulated to Rs 270 billion and has not been settled or even accounted for, being parked in energy holdings. This budget gimmickry will not remove the circular debt but will rather take focus off it and help it to become a monster difficult to handle. GENCO reforms and efficiency are a far cry and even new units like Nandipur become an embarrassing scandal in terms of their operation and efficiency. Recoveries and line losses are at an all time high with no relief in sight. Where we really need to spend — education and health — are so low in priorities that a cut and paste of last year’s allocation are a reflection of these contradictions.

Similarly, the other problem that the budget presents is the low revenues to cover these expenses. Again, all parties agree that tax reforms are absolutely essential as less than one percent of the people in this country pay tax. The tax to GDP ratio is 7.5 percent and needs to double up to support the type of expenditure the government is incurring. The manifesto of the government rightly points out to the fact that tax reforms and broadening of the tax net are required to reduce the tax burden. However, we see no signs of that happening in the last two years. The Federal Board of Revenue (FBR) is still a place to issue SRO exemptions to the rich and impose indirect taxes on the poor. The present budget has imposed Rs 253 billion new taxes but does not have any plan of decreasing the GST or withdrawing exemptions of Rs 665 billion to the rich. Some mention of taking the SRO out of the FBR is in the budget but then it will be in government hands to be exploited even more.

The budget itself shows a deficit of 16.26 trillion. This revenue gap is the mother of all problems. This is a fundamental flaw that ruins the whole economic stability. With a deficit of this scale Pakistan will always be resorting to all measures that are designed to cripple the economy. We will keep on borrowing from the IMF and other lenders, we will keep borrowing more to pay off earlier borrowing, we will tax the already taxed, we will print more notes to fill up the gaps, we will do figure fudging to hoodwink the public and agencies and we will become more dependent, more indebted, more enslaved. This destroys the internal and external credibility of the economy and the country. While the government boasts of the higher rating of agencies like Standard and Poor and Moodys giving a higher rating, its own published Pakistan Economic Survey shows a dismal performance on local and foreign investment. The GDP growth rate has missed the target as we have lower exports, manufacturing and agriculture growth. This response is due to a lack of business confidence on the potential of the economy. In a country where the banking sector is lending more to the government to pay off debts than the private sector to set up and expand businesses, it is time for serious rethink, redesign and reform.

But tough reforms can only happen if the people making reforms are leading by example. While we were promising expenditure cuts to the Prime Minister (PM) and President House of 30 and 40 percent in the manifesto, we see almost a 100 percent increase in their lavish spending. While the PM has allocated Rs 13,000 per month for poor households, his own household allocation has been fixed at Rs seven million per month. While we talk about appointing competent professionals to public sector organisations we see the PPP trend of appointing family and loyalists continue and while we talk about taxing more people we see parliamentarians paying laughable tax amounts. While we ask people to pay exorbitant electricity bills, we see Parliament House and the PM Secretariat defaulting on their bills. When we compromise on principles we compromise on results. Reforms need a discipline that is non-existent in our lawmakers and our leaders. With so many vested interests in the money available, the budget is just a ritual without purpose. Reforms are a way of thinking, believing and doing whatever it takes. Unfortunately, budgeting has become a way of dodging, deflecting and not doing what should be done.

The writer is secretary information PTI Punjab, an analyst, a columnist and can be reached at andleeb.abbas1@gmail.com