At last there is a hint of silver lining across the economic horizon. Adviser on finance has said that there will be no new taxes in the next budget. This implies that the government has set a daunting task as budget deficit needs to be strictly controlled.
Obviously, the question comes to mind that how and from where additional resources would be raised to meet the current and development expenditures which are bound to increase on the usual annual basis. It should be possible to keep the two, income and expenditure in balance through priority to completion of ongoing development projects.
In view of the rate of inflation expected to be around four percent, any big increase in current expenditure can be ruled out.
On the income side, the adviser expressed his confidence in achieving the six percent rate of economic growth. With this rate of growth plus four percent inflation, the government’s income will go by at least 10 percent without additional taxation. The conclusion thus is that with income rising more than expenditure, the need for new taxes can be eliminated or at least minimised.
Over the last five years a number of development projects, specially, in power sector, have come on stream. There is thus considerable addition to growth and national income. That should be encouraging. In any case, the fiscal policy will require measures that ensure macro-economic stability.
In order to reduce current account deficit, the adviser said that imports will be gradually reduced. On the other hand, it is exports which should continue going up on a steady basis. Export-boosting measures are of vital importance in consultation with exporters. It is evident that fiscal policy can be used as a tool to accelerate exports and reduce imports.
While the subject of macro-economic situation has been under debate recently, it may not be out of place to invite attention to the problems and the plight of the people. They need more facilities of affordable education and health, transport, housing and, above all, creation of jobs. Expectations continue that more funds will be allocated for them both by the Federal and the provincial governments.
It must be said that the minimum wage at Rs15,000 per month is on the low side. Though inflation is down, yet in view of the present level of prices, especially, those of kitchen items, the minimum wage calls for review. It is often said that the fruits of development should reach the people, and this perhaps could be one measure to prove it.
Macro-economic stability, through reduction in budget and current account deficits, focus on high growth, reduction in borrowings and focus on the welfare of the people remain the sine qua non of a prudent fiscal policy.