This particular budget has been a long time coming. After all, everybody has been talking about it for three months. Interest in it is more than purely economic.
For three months, the PPP has warned of a tough budget ahead, highlighting the disastrous economic legacies of the Zia regime and warning that only surgical measures can redress the situation. This exercise has paid political dividends. The IJI was all geared up to mobilise street power against ‘the gross injustices of the budget’, only to find the actual budget prescriptions quite inoffensive, almost welcome, to most Pakistanis. There is nothing ‘tough’ about it, no great injustices to fuel revolt either in the factories or in the bazaars and not too many concessions to the IMF as predicted.
The trick in this exercise has been to raise expectations of nasty times ahead, and then to present a soft budget which is received with a mighty sigh of relief by everyone. This is the opposite of what we are normally accustomed to expecting in this country —promises of good times ahead with little to show for it subsequently. For the first time in six months, the PPP gets full marks for a strategy which has paid off.
The budget has economic merits. Education expenditures are up by nearly 100%; defence is solid enough, without hogging the cake; wages for government employees are to rise slightly; the Peoples Development Programme will kick off with Rs 3 billion; power generation is to improve with the promise of no load shedding after June this year; administrative expenses are actually down, for once, by about 14.5%.
On the other side, the tax base is to be broadened (about time), trade liberalisation is to be followed (no choice), a sales tax is to be graduated over a period of years. There are proposals for privatisation, including five new private finance companies, without dislocating the public sector. Hitherto income-tax exempt companies and foundations from the Services are to be included in the tax net (no reason why not) and there are other reasonably mild measures which businessman can swallow without too much discomfort. User charges on telephones, postage etc are up by less than 10%, but that was to be expected at the very least, and it’s no big deal. Petrol hasn’t been taxed, and that’s the way it ought to have been. The question of agricultural income tax has been sidelined because it is so inextricably linked to a complex structure of subsidies and requisition prices, and needs detailed structural adjustments in the economy, including a careful constructed packages of land reforms, before it can be approximately tackled.
The budget, however, is not going to help the Punjab government resolve its financial problems, which is not to say that it is inimical to the people of the province. Quite the contrary, since the federal government is determined to spend a lot of money there via the PWP, WAPDA, etc. However, Mr Nawaz Sharif’s financial difficulties are of his own making, and so he has been left to sort out his deficits himself. Consequently, Mr Sharif’s own Punjab budget may require many propertied people to tighten their belts. But then the rich can afford to pay, and so they should.
All said, a good, sensible and workable formula from Benazir Bhutto and Co.