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May 6, 2021

Budget proposals

 
May 6, 2021

While Prime Minister Imran Khan is sanguine about giving maximum relief to people in the upcoming budget, there is a need to consider new budget proposals keeping in mind the overall economic strategy that has been in a mess for the past three years. First, the public needs must take precedence over all other considerations. So far, there appears little evidence that the government has been serious in tackling the problems that common people in the country have been facing. The focus of the government has been more on facilitating real-estate, instead. Then there is the question of new development projects that must become prominent in the coming budget proposals. In national budgets, development outlays have been on a low priority for decades. When the PTI-led government assumed power in 2018, many people hoped that the new government would set its preferences right.

With the Covid-19 pandemic still raging, there can be no excuse for not including health as a major concern in the new budget proposals. Over the years, the budget allocation for health has remained dismally low, resulting in highly inadequate health facilities for common citizens in the country. Any surge in a new pandemic is likely to put a tremendous strain on the existing health infrastructure. As the Covid-19 pandemic is likely to continue for at least another year or so, the upcoming budget proposals must take this into account. If the pandemic gets out of hand, as it has done in India, the government will not be able to use excuses for having not enough budget provisions. Ultimately we need to vaccinate all 225 million people in the country and for that we need not only an upgrade of all health facilities across the country but enough resources to buy and administer the vaccines as well.

There are also some supplementary issues related to a broader economic framework, one of which is the handling of spiraling circular debts. Related to it is also the challenge of dealing with IPPs. Finally, to attract foreign investment in the capital market, the FBR has received some useful budget proposals from the Pakistan Stock Exchange Limited. One of them is aimed at encouraging non-resident to bring new investments to Pakistan. Since this was one of the promises of the PTI before elections, it should now make good on it. To attract new foreign investment in the capital market it is essential to provide a level-playing field to all such investors. As of today, the capital gains tax on equity securities is higher for non-residents than the capital gains tax in the debt market for non-resident companies with no permanent establishment in Pakistan. In the new budget, the government could align the rates of capital gains tax on disposal of equity securities of non-residents. In short, the budget proposals must be wide-ranging, incorporating public needs as well as corporate concerns so the economy can bounce back from the recent slump, and the people are not short-changed in the process either.