Daily Times

The budget for the fiscal year 2016-2017 has arrived. As expected, government yet again presented a conventional financial scheme for the next year with targeted benefits for agriculture sector and exporters. The total outlay of the budget is 4.394 trillion rupees, out of which 1.45 trillion rupees will be used for debt-servicing and interest payments to IMF and other financial institutions. 1.675 trillion rupees have been allocated for the Public Sector Development Programme. Government has decided to impose new taxes in the form of tax duties, sales tax and petroleum levy. This brief overview of the budget 2016-17 suggests that there is nothing for the poor and middle class. Government is yet again focusing on long-term economic goals, and an overview of the budget suggests that benefits are lesser than the costs.

The ‘benefit’ side of the budget consists of two major sectors — agriculture and exports. In the last few years, the agriculture sector has faced an awful situation. The cost of production is constantly going up, and due to worldwide financial slump the prices of food products have gone down. The decision of importing vegetables from India has also affected the farmers. Another factor is the high price of Urea and DAP. This entire situation engenders a terrible situation that drastically affects the agriculture sector. The production target of important crops of rice and cotton has been missed. In these circumstances, the agriculture sector deserves some kind of benefits, so that farmers and exporters can contribute to the process of economic growth in a better way. This is a good step in right direction. Although Pakistan is an agro-based economy, contribution of the agriculture sector to the national income is going down, but nonetheless, this sector deserves government’s attention.

Another important thing in this regard is government’s planning for the elections in 2018. The current government’s stronghold is Punjab where agriculture is one of the most integral sources of earning. It is expected that these benefits would help farmers.

Exporters have also been successful to get some benefits from government’s financial planning. SMEs will be targeted for technological upgrade. A zero-rated tax scheme has been suggested for leather, textile, and sports and surgical goods sector. It has been decided that all sales tax repayments will be made in the next financial year. These incentives are essential, as there has been an 11 percent decline in exports as compared to previous years.

On the cost side, new withholding taxes have been imposed. In this year’s budget government has decided to impose high taxes on stationary items, and dairy products have also been targeted for the withholding tax. The bad aspect is the increasing difference between direct and indirect taxes, as indirect taxes are 87 percent of the total tax revenue generation. This describes government’s poor revenue collection mechanism. One must not forget that in a population of 180 million people only 900,000 files the tax returns. Last year, government had announced an immensity scheme to increase the number of filers, but it appears to have failed to achieve the target. According to government’s official statement, only 9,000 people registered themselves through this scheme.

Ironically, once again authorities are giving importance to the withholding and sales tax. The increase of sales tax on different items will affect the consumers. Although government is taking the plea that most of these items are used by upper class or upper middle class but that is not true. The last census took place in 1998, and since then government authorities have been using hypothetical figures to differentiate between rural and urban population. The rural population is on a decrease as people continue to move to cities for employment, thus making cities overcrowded. In this situation imposing sales tax on different drinks or stationary items will be inadequate to resolve the crisis. Last year, government gave an incentive to construction businesses by lowering different taxes and duties on construction material such as bricks. And strangely, this year government imposes a new sales tax on cement, which would result in an increase in cement price.

It is true that through these indirect taxes government will be able to achieve its revenue target but at the end people will also resist. We can see that due to poor price mechanism in Pakistan, people haven’t been able to get full advantage of reduced oil prices. The need of the hour is that government should address this problem. Budget deficit is not a big deal but controlling the budget deficit through loans is something horrible.

Another important thing that this budget failed to address is unemployment. According to the finance minister, unemployment has been reduced to 5.9 percent in the past year, but it doesn’t appear to be. There are a number of educated young people in the market looking for a job. The Prime Minister Internship Programme or Benazir Income support Programme (BISP) may be helpful for political gains, but they are not helpful to eradicate the issues of poverty and unemployment. Instead of investing a great deal in this kind of programmes, government should focus on job-creation and investment opportunities for more robust economic progress.

Population growth and poverty are two basic problems of Pakistan. The new budget has not been able to address these two problems in a better way. For instance, the present solution for poverty is the BISP and for economic growth we are relying on the China-Pakistan Economic Corridor (CPEC). This is something that would not work in the long run. CPEC will be helpful in the process of economic growth, but putting all balls in a single basket is rather naive. Unless and until we do not increase our direct tax revenues, we will not be able to address the problem of low investment. Pakistan is facing the issues of terrorism and load shedding, thus making it difficult for foreign investors to invest in Pakistan. The solution to these two problems is not easy; we need long-term planning to resolve issues. For the last two years, government has been allocating funds for Dia Meer Bahsha Dam, but nothing practical has been done in the regard. It is imperative for government to take some practical steps in this regard so that people can get advantage from the cheapest source of energy.

The budget 2016-17 is more or less similar to the previous three budgets of this government. This is a government that is following IMF’s structural adjustment programme. Every year we hear claims that Pakistan would not go bankrupt, government has saved it, but no one talk about the debt-burden that has been laid on us. In the next two years the repayment of debt will start, and with decreasing exports and low tax revenues, it looks like that Pakistan would again have to go to IMF for help. The budget is here, the poor are struggling, and the middle class is feeling the heat. The budget 2016-2017 is nothing but a homeopathic medicine to complex economic problems.

The writer is a freelance columnist and can be reached at raja_4_92@live.com