The budget

Capital suggestion
It is a good budget. Given all the constraints all around us, it is a good budget. It is a good budget because it targets a deficit of 4.3 percent of GDP. It is a good budget because: the target on inflation is in the single digit; the target on GDP growth is 5.5 percent; the Public Sector Development Programme is Rs1.5 trillion; there’s appropriation of Daimer-Basha and a Green Line for Karachi; SROs only by parliamentary approval; establishment of an EXIM Bank; customs duty top slab to be 20 percent; duty on aviation industry goes down to zero and tax exemption for industries in Khyber Pakhtunkhwa.
The PML-N’s budget-making track record is superior to all the rest. The PML-N has managed to bring down the budgetary deficit from 8 percent of GDP to less than 5 percent of GDP-a positive impact of over Rs500 billion. The PML-N has managed to increase our foreign exchange reserves from $11 billion to over $17 billion. The PML-N has managed to bring down the rate of inflation from around 10 percent a year to less than 5 percent a year.
Yes, 15 targets were set last year and 11 of them have been missed including the GDP growth target, tax revenue target, export target and foreign direct investment target. This time around the revenue target is realistic but the GDP growth is overly ambitious and the expenditures estimate is grossly understated.
According to Ahmed Bilal Mehboob, “research on the fourteen budget sessions of the National Assembly shows that the assemblies discussed the budget for an average of 34 hours. Both the duration and the time spent on budget debate are one of the lowest in the world.” Simply stated: parliament does not give a hoot to the finance bill.
The tax revenue stream under Budget 2015-16 continues to be 60 percent indirect (read: regressive) and 40 percent direct. The single largest item in the budget continues to be debt servicing whereby 92 percent goes into servicing domestic and a mere 8 percent into servicing foreign debt.
The second-largest item in the budget is the Public Sector Development Plan (PSD) – and around 70 percent of the PSDP is spent on politically determined brick and mortar projects (both at the federal as well as the provincial level). An estimated 20 percent is spent on the purchase of vehicles and no more than 6 percent is spent on human capital. PSDP has at times been called ‘a slush fund for politicians’.
I have been told that accounting is the “practice and body of knowledge concerned primarily with methods for recording transactions, keeping financial records and performing internal audits.”
Sakib Sherani recently wrote: “A national budget should be the embodiment of an overall economic vision of a government. Rather than being a mere collection of numbers worked out on the basis of taking the previous year’s allocations and applying an ad hoc increase....the underlying fiscal and tax policy that underpins a budget should be designed to achieve a higher end.”
Should a budget be designed to achieve a higher end? Yes, I think so. And what should that higher end be? For the record, we need to create at least 36 million new jobs in the following 10 years – and there could be no higher end than to provide employment to all the entrants of the labour force. And Budget 2015-16 has almost nothing in it towards the achievement of that higher end.
The average life expectancy of our budgets is around three months (before the revisions start kicking in). The power sector is out of the control of the federal government (as of the last day of February, the circular debt stood at a colossal Rs606 billion). I am convinced that the energy sector is going to shake the foundations of the budget in the next few months.
It is a quantitative budget – not qualitative. It is numerical – not imaginative. It is math – not wisdom. It has been a mathematical, arithmetical and algebraic exercise. It is not a thinking budget. It should have been a pensive, contemplative budget – a budget with the future in mind and a budget to achieve a ‘higher end’.
The writer is a columnist based in Islamabad.
Email: farrukh15@hotmail.com Twitter: @saleemfarrukh