Thursday, 1 June 2017

Budget 2017-2018: an anodyne view

Courtesy:-  Malik Muhammad Ashraf

Preparing a budget and selling it to the public, more so to political opponents, is an arduous undertaking even in the most affluent and developed countries, particularly when it comes to new tax proposals and measures aimed at keeping the corporate sector in good stead to spur economic growth.
Besides generating much-needed revenue for the government, taxes also affect the people – changing their economic situation. This makes taxes an unpopular proposition. So every segment of the society tries to look at the budget from its own perspective and so there is always a mixed reaction on the budgets presented by the governments.
The exercise is even more excruciating in third world countries like Pakistan that are facing financial constraints. Therefore, not surprisingly the budget for 2017-18 presented by the PML-N government has also spurred a debate about who benefits and who loses as a result of it. The debate, however, lacks objectivity.
The opposition as usual has outright rejected the budget as being anti-people. The reaction from different segments of society also stems from how certain measures affect them rather than from an overall view about the impact of the budget in promoting development and rectifying the maladies afflicting the economy.
Before delving into an appraisal of the current budge, it would perhaps be pertinent to have a brief review of how the economy has performed under the current government and how far their claims in this regard are believable. That would necessitate a look at the condition of the economy when the present government assumed power. According to verifiable available data, GDP growth rate was at an abysmally low 3 percent, budget deficit stood at 8.8 percent of GDP, inflation was in double digits and the country was likely to default on IMF loans. Four years down the line, the GDP growth rate stands at 5.28 percent – the highest in the last ten years.
Budget deficit has been brought down to 4.2 percent of GDP, inflation has stayed at a single digit, foreign exchange reserves are at the highest ever level, the stock exchange is buoyant, interest rates continue to remain at 6.75 percent, the per capita income in terms of dollars has risen to $1629 as compared to last year’s $1531 (a 4 percent increase).
The country is now among the emerging economies of the world. It has terminated its reliance on IMF loans. These are not merely the claims of the government. Their authenticity has been repeatedly endorsed by international lending and rating agencies as well as the international media. The latest report of the World Bank portrays a very encouraging picture about the economy by predicting continuous rise in the GDP growth rate.
That revival of the economy did not come about on its own and undoubtedly is a sequel to the prudent economic management by the present government through macro-economic reforms, particularly pertaining to fiscal management. There might be a host of areas where a lot needs to be done but there is no doubt that the overall performance of the economy during the last four years has been quite satisfactory.
In the current budget, the total outlay is Rs4.75 trillion, carrying a deficit of Rs1.5 trillion (4.1 percent of GDP) that sets a target of 6 percent GDP growth rate during 2017-18, showing the resolve of the government to consolidate the gains that have already been made and to build on them with a greater emphasis on development of infrastructure, energy, agriculture and information technology. In that sense, it is a development-oriented budget – and rightly so. That should be the priority of any government. The wellbeing of the masses through welfare-oriented socio-economic measures requires the availability of the necessary resources, which are inconceivable without nudging development as a top priority.
The development outlay stands at Rs1001 billion, 25 percent higher than the last year. The tax collection target has been set at Rs4013 billion, designed to raise more revenues that are needed to reduce the budget deficit and increased reliance on indigenous resources for development. In this regard, new taxes amounting to Rs120 billion have been suggested, with a major focus on direct taxes. The major expenditures include Rs1.36 trillion for interest payment and Rs920.2 billion for defence.
The government also announced a number of measures to spur economic activity and facilitate the business community and other sectors including reduction in mark-up on agriculture loans, relief for textile and other sectors, exemption from tax on export of IT services, reduction in corporate tax by one percent, concessionary duty on hybrid vehicles, relief in duty on all electric cars and withdrawal of tax regime on builders.
The poor were also not neglected. The allocation for Baitul Mal has been increased from Rs4 billion to Rs6 billion. BISP allocation has been raised to Rs121 billion from Rs115. A ten percent special allowance has been given to army personnel and a fixed raise of Rs8000 has also been proposed for FC personnel in view of their sacrifices in the fight against terrorism. Similarly, enhanced allocations have been made for the health and education sectors. The government will be paying subsidies on different items amounting to Rs138.2 billion. Apart from this, government servants and pensioners have been given ten percent raise in salaries and pensions, respectively. The minimum wage has also been raised to Rs15000 from Rs14000.
From the foregoing facts it is quite evident that the budget did have something for all segments of society. Those who are critical of the budget have a democratic right to be so but they need to be realistic and not mislead the masses. I have yet to see a budget without taxes. The track record of the present government in handling the economy has been far better than the previous governments and that must be acknowledged ungrudgingly.

Tuesday, 31 January 2017

Fall in corruption index

Courtesy:- Malik M Ashraf

The Transparency International in its fourth consecutive annual report has indicated fall in corruption index in Pakistan. Since 2013 corruption has declined by 19 points with biggest nosedive of nine points during 2016. According to the report Pakistan has achieved the distinction of being number two state in South Asia in regards to tackling corruption. That indeed is matter of great pride for the country as well as the incumbent government, which has made credible efforts to eliminate avenues of corruption in the higher echelons of the government and different tiers of the government machinery.

Wednesday, 28 December 2016

The Indus Water Treaty and the World Bank


Pakistan and India have been involved in intractable discussions to resolve the dispute regarding construction of two hydro electric power plants namely Kishenganga and Ralte being built by the latter in violation of the provisions of the Indus Water Treaty. So in view of the stalemate on the issue Pakistan requested the World Bank which had brokered the accord and also assumed the role of guarantor of the Treaty, to  establish a court of Arbitration to resolve the differences between the two countries. India simultaneously requested the World Bank for the appointment of a neutral expert.

The World Bank initially agreed to set up both the Arbitration Court and the appointment of the neutral expert. However in response to the Indian objection on two parallel processes which it maintained was not legally tenable, the World Bank decided to announce   a ‘pause’ and asking both the parties to resolve the issue through bilateral avenues.  Giving the reason for this action the President of the Bank in a letter written to finance ministers of both the countries said “ We are announcing this pause to protect the Indus Water Treaty and to help India and Pakistan to consider alternative approaches to resolving conflicting interests under the treaty and its application to two hydro electric power plants. This is an opportunity for the two countries to begin to resolve the issue in an amicable manner and in line with the spirit of the treaty rather than pursuing concurrent processes that could make the treaty unworkable over time. I would hope that the two countries will come to an agreement by the end of January,”

The position taken by the World Bank is regrettably akin to what India had argued. It is tantamount to shirking the responsibility as a guarantor of the accord charged with the responsibility, as per the Treaty itself, to ensure that both parties stick to the provisions of the accord and in case of failure of the two sides to sort out their differences on any issue related to the treaty, appoint a court of Arbitration. The Indian government has welcomed the ‘ pause ‘ announced by the World Bank. A spokesman of the Indian Ministry of External Affairs has said “By temporarily halting both processes now, World Bank has confirmed that pursuing two concurrent processes can render the treaty unworkable over time. Indian remains fully conscious of her international obligations and is ready to engage in further consulting on the matter of resolving current differences regarding the two projects”

It is pertinent to mention that Pakistan had approached the World Bank after being frustrated to find a solution to the dispute through permanent Indus Water Commission, a body set up under the Treaty to settle disputes through mutual consultations. The arbitration was even more necessary in view of the latest threats by Modi government to control the flow of water of the western rivers into Pakistan.

Reacting to the World Bank decision, Finance Minister in his letter to the President of the World Bank has rightly maintained that under the Treaty no party can ‘pause’ performance of the obligations under the Treaty and the position taken by the Bank would only prevent Pakistan from approaching a competent forum and having its grievances addressed.  It is hard to contest the points made by Ishaq Dar as under the Treaty it was the World Bank which could set up a Court of Arbitration when there was a stalemate on a dispute. The bilateral arrangement had failed to produce the desired results. It was why Pakistan had approached the guarantor to fulfill its obligations under the Treaty.
Reportedly India held a meeting of the inter-ministerial task force last week which has been tasked to enhance storage of western rivers waters, which is a very alarming development. Under the circumstances, the World Bank avoiding to take a position in line with its obligations under the Treaty amounts to almost giving up on its own brokered agreement. The hope expressed by the World Bank that both sides would be able to resolve their differences, represents lack of understanding of the prevailing situation.  India is actually trying to build pressure on Pakistan to back off from the position taken by her on the Kashmir issue, particularly in regards to current uprising in the valley. It is not a technical issue. India has been threatening to review the Indus Water Treaty in the backdrop of Uri attack which it blamed on Pakistan. In an atmosphere loaded with tensions between the two countries, expecting them to show goodwill in resolving the issue is hoping against hope. The World Bank has a role to play as per the Treaty and it should not try to avoid it.

Under the Indus Water Treaty, the waters of the Eastern rivers Sutlej, Beas, and Ravi had been allocated to India and the Western rivers Indus, Jhelum and Chenab to Pakistan except for certain uses allowed to India including power generation without altering the water flows. According to reliable sources India is contemplating to launch more hydropower projects with a cumulative power generating capacity of 32,000 MW on the rivers allocated to Pakistan and consequently attain the capability of regulating the water flows to Pakistan, especially reducing water flow in the river Chenab which irrigates most of the land in Punjab. Such a situation could lead to serious consequences and may even threaten peace and security in the region in the event of armed conflict over the issue between the two countries.

It is pertinent to point out that the case of Kishanganga has already been considered by the Permanent Court of Arbitration at Hague which in its final award on the dispute while recognizing the Indian right to build the Dam did address Pakistan’s concerns about India keeping the level of reservoirs below the Dead Storage Level and also recognized the concept of environmental flows in rivers to ensure that the power generating projects were operated in an environmentally sustainable manner. The Award announced on 20 December 2013 specified that natural flow of water must be maintained in Kishanganga river at all times to maintain environment downstream. But India is not even abiding by the award of the Permanent Arbitration Commission.Pakistan is not asking for something beyond the treaty obligations of the World Bank. The World Bank must revisit its decision and set up a court of arbitration as requested by Pakistan, because there was no hope of resolving of this issue through bilateral arrangement as suggested by the previous Indian behavior on issues which ultimately had to be referred for arbitration.

Friday, 2 December 2016

CPEC harbinger of regional connectivity


Malik Muhammad Ashraf

CPEC harbinger of regional connectivity

Regional connectivity and development of the required infrastructure through cooperative efforts of the participating countries for shared economic prosperity is a visionary concept and recipe for addressing issues related to poverty alleviation and development, as well as ensuring peace through economic interdependence. The leadership of new China deserves credit for pioneering this movement through its ‘One Belt One Road’ initiative, which is likely to benefit 26 countries. The CPEC being the pivot of the initiative has generated a lot of interest and acceptability among the countries of South Asia and Central Asia, and even some of the European countries have shown their willingness to join it. Pakistan due to its geo-strategic location is a key participant in making the venture successful. Pakistan surely will also be its greatest beneficiary by becoming a hub of economic activity for both regions. CPEC, therefore, is a harbinger of regional connectivity.

Tuesday, 15 November 2016

CPEC becomes operational

Courtesy:- Malik M Ashraf

WITH the formal inauguration of Gwadar port by the Prime Minister on Saturday that also coincided with shipment of the Chinese trade cargo for Middle East and African countries, CPEC became operational; a reality which undoubtedly holds key to the prosperity of the entire region. Reportedly a trade cargo convoy comprising 60 containers reached Gwadar on Friday through the western route of the Corridor and a Chinese ship also docked at port to carry goods to its desired destinations.

Friday, 14 October 2016

Pakistan-China defence and economic ties

Courtesy:-  Malik Muhammad Ashraf

The relations between Pakistan and China are beyond the realm of normal diplomatic ties, and no terminology in the diplomatic parlance can really explain the nature of these bonds. China is not only a true friend but also a benefactor of Pakistan. The diplomatic relations established in 1951 have developed into an impregnable, vibrant and long-lasting partnership over the years. Their ties have always remained on the upward curve, belying the maxim that in international relations there are no permanent friends and enemies.

Friday, 2 September 2016

Regional linkages and shared prosperity

Courtesy:- Malik Muhammad Ashraf

The China-Pakistan Economic Corridor (CPEC) arguably is the pivot of the Chinese One Road One Belt initiative, which envisages not only the revival of the centuries’ old Silk Road (for trade and cultural interaction) but also a participatory process of sharing the fruits of economic development made possible by regional and global linkages that it desires to orchestrate. It is really a matter of great satisfaction that due to an abiding commitment both by Pakistan and China to see this project implemented within the envisaged time frame and their priority for the Early Harvesting Projects (EHP), a number of first phase initiatives costing $18 billion likely to be completed by 2018 are already under execution. Another set of ventures with an accumulated cost of $17 billion is under different stages of approval. CPEC involving an investment of $46 billion covers wide-ranging areas including energy, roads, railways, ports, optic fiber, oil and gas pipelines and industrial parks among others.