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.

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