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June 4, 2016

Economy has a long way to go


June 4, 2016


With emphasis on accelerating economic growth, Finance Minister Ishaq Dar presented the 2016-2017 federal budget which carries incentives for agriculture, exports, industrial and various other productive sectors. He vowed to maintain financial discipline, contain inflation, create employment, reduce poverty and expand the tax base. The fourth budget by the present government seems to continue its economic agenda with greater effort. Therefore the pursuit of goals outlined by him and their attainment has achieved still higher significance.

He acknowledged that the potential of the economy is more than what has been achieved and there were areas of economic activity which needed boost and encouragement. True enough that economic indicators have been showing considerable improvement but it is also true that the economy is yet to go a long way ahead. His proposal that a charter of economy be put together through consensus among all political parties merits attention.

The taxation measures and  relief measures as proposed by the finance minister, which are detailed and numerous, bring into focus the contours of fiscal policy which acts as an instrument to move towards economic progress. Yet the fact remains that the  fruits of such progress must filter down to the common man. A large number of people still living below the poverty line make this all the more compelling

Usually the cut in development spending impeded growth. The finance minister said that allocations for development projects were being kept intact and this would continue. In the Rs800 billion federal PSDP, a large allocation for energy sector, information technology and infrastructure is quite pronounced. With provincial development programmes added to that it is reasonable to expect that new employment opportunities would be created. Private sector investment would be further addition,

Looking at the budget from the common man’s point of view, it is of vital importance that price stability, employment and expansion in social sectors like education, health, transport and housing continue to expand. Though inflation has been contained but in other areas much effort is still needed. The increase in pay, pensions and allowances to government employees is noticeable. So is the increase in the minimum wage. It has been claimed that the budget would put least burden on the poor and middle class. What kind of impact it will have on them would be clear with the passage of time.

Obviously, as the economy moves ahead, its dependence on borrowing should continue to reduce. Only with that the debt burden can go down and so the expenditure on interest payments Incidentally the interest payments is the biggest charge on current expenditure. It has been often acknowledged that the economy has the capacity and potential to create resources to move towards that objective.

The finance minister said that policies pursued in the last three years had pulled the economy out of problems. However, it has been argued that the emphasis on big projects has been much too pronounced. It must be said that there are competing claims on a developing economy like ours. Its management remains a fine act of balancing. But if the economy continues to grow and the benefits continue to reach the society, especially the poor and middle class, the fiscal policy would have achieved its objective. The test of it would lie in attaining the stated goals and keeping the promises.


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