The government claims poverty has been slowly but surely reduced in the last few years. More ambitiously, it suggests that the new “pro-poor” budget will drive a nail in its coffin. The opposition says, not unjustifiably, this is hogwash. Inflation is eating into the nation’s entrails, inequality is increasing, there is no positive change in the low savings and investment ratios, a balance of payments crisis is in the offing, and agricultural growth is Allah-given rather than Aziz-generated. But there is some definite economic progress for which the Musharraf regime can claim credit.
If economic growth is all about incremental gains for marginalized sections of society under capitalism, then it is true that the rate of growth of poverty has probably declined in the last few years, if only because of the trickle down effect of high GDP growth rates. That is to say that while absolute numbers and levels of poverty may still be increasing, they are increasing at a lower rate than earlier. But we shall require growth rates in excess of 8% a year for many years to make any significant dent in absolute levels of poverty. In the same context, however, it must also be admitted that higher GDP growth rates are concomitant with increasing inequality under capitalism unless there is a consciously built up and sustained public or social welfare sector for the have-nots with free or subsidized health, education and unemployment benefits. Regrettably, this was not on top of the mind of the budget-makers who have stuck lamely to the usual incremental-statistical approach to deeply-anguished human issues.
This is what the big deal boils down to: government employees, past and present, will get “dearness” or “conveyance” allowances of less than Rs 100 per month. Public sector teachers, who currently get a pittance, will get Rs 500-Rs 750 more every month. Middle class employees and senior citizens will get some tax relief. The minimum wage is up from Rs 3000 to Rs 4000 per month. And so on. But all this is less than the rate at which inflation is eating into their savings and income! We understand that public sector hospitals will henceforth provide free MRI, angioplasty and dialysis to all patients. This is good news. But have the number of such hospital facilities and staff manning them been quadrupled at least as required by a population of 150 million? No.
The government has done well to rationalize the trade policy a bit. Duties on input items have been reduced; cement price has been fixed; subsidies on certain food items via utility stores have been retained; commercial property transactions will be federally taxed; low rent tax has been fixed; cigarette duties increased, incentives given for the dairy and poultry industry, and so on. But the real tussle is over the development budget versus the defense budget.
The development budget is genuinely unprecedented. It was Rs 272 bn last year and is Rs 435 billion this year. Out of this, Rs 180 bn is for hydropower projects, Rs 50 bn is for earthquake reconstruction and Rs 132 bn for infrastructure. The provinces will get about Rs 50 bn for various jobs. But health and population welfare will get less than Rs 15 bn! Considering that nearly 40% of yearly development funds are not spent because of institutional capacity building constraints, the increase may be largely ceremonial. At the end of the year, these “lapsed” funds are conveniently gobbled up by “unexpected” defense expenditure requirements. This brings us to the most critical element of the budget again this year – defense expenditures.
Generally speaking, there is an average increase of about 10%-15% every year in the budget for defense. But at the end of the fiscal year, this actually comes out to have been closer to 20%. The defense increment is always at the expense of the development budget. The defense budget this year is Rs 250 bn, 12 percent more than the Rs 223.5 billion allocated for 2005-06. But actually the government spent Rs 241.1 billion last year. By that reckoning, it is safe to estimate that the actual defense spending will be about Rs 275-Rs 300 bn this year. No other sector gets such royal treatment. In fact we have been advised to expect much the same pattern for the next 15 years because the brave defenders of the soil are modernizing and upgrading their equipment by buying new war planes, guided missiles, AWACS, frigates, etc. If we add to this an amount of approximately Rs 50 bn that is taken out of civil expenditures for military pensions every year, the true defense burden will be about Rs 350 bn this year, almost the same as the development budget that will actually get spent. Howwzat?
The Pakistan military is the biggest land owner and industrialist in the country. It runs an excellent welfare state within an abysmal non-welfare state in Pakistan. It gobbles up the largest chunk of civilian funds in the budget. On top of that it has monopolized political power in the country Is this fair? We are poor and out of power because the military is rich and in power. Until the situation is overhauled, it is futile to talk of a “poor-man’s budget” or “welfare state”.