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June 12, 2021

A budget to please some, ignore others

LAHORE: The federal budget for 2021-22 is full of promises based on ambitious increase in tax revenue. Government employees’ salaries have been increased by 10 percent, while minimum wage payable by the private sector increased by 13 percent.

Some budget measures have pleased those associated with trade and industry, but as far as the common man is concerned it contains nothing that could assure that there would be decline in prices.

In fact, the finance minister felt proud that wheat rates have increased globally by 54 percent and by only 29 percent in Pakistan. He conveniently ignored the fact that the increase in wheat rates was from last years’ high base, and if we compare the rates with a year earlier the increase is very high.

Similarly, increase in sugar prices is compared with current increase in the commodity rate. The original sugar price was Rs55/kg in Pakistan that went up to Rs110 and now fluctuates between Rs95-115/kg. With this kind of thinking on prices we may not see the prices of essential items going back to previous levels.

Trade and industry reaction was both appreciative of some measures while critical on others.

SAARC Chamber President and Central Chairman United Business Group (UBG) Iftikhar Ali Malik hailed the epoch making historic reforms for ease of doing business. “The remarkable measures announced in the budget would help set a proper direction for the national economy to flourish as well as uplift poor segments of the society.”

Appreciating the decision of Prime Minister Imran Khan not to increase power and gas tariff or levy new taxation, he said it would ultimately provide solace to the business community, while incentives’ packages would help accelerate economic activities in the country and boost exports.

The gas and power rates have not been increased for now. But for how long? No measures have been announced to make the system efficient.

At current inefficiency levels, the rates would have to be increased. The increase in minimum wage from Rs17,500 to Rs20,000 was not taken in good stride by the exporters.

Those employing 4,000-10,000 workers in the apparel industry would be booting an additional salary bill of Rs1 million to Rs2.5 million per month. Exporters are looking for more subsidies from the government and they are getting subsidised power and energy.

This additional salary bill would nullify the advantage they currently enjoy. There is no denying the fact that an increase in wages was essential because of the increase in cost of living in the past three years.

This regime did not increase the wages in its first two years of power and has compensated the workers by a hefty increase. Is the industry prepared to absorb this increase?

This government is in the habit of delaying decisions. It has not increased petroleum rates for more than four months although the crude oil prices have gone up. One day it would be forced to increase the rates by a high percentage.

While addressing a press conference after the Federal Budget Speech 2021-22, LCCI President Mian Tariq Misbah, flanked by other office bearers, said that reduction in regulatory duties on raw materials would bring down the cost of doing business.

The LCCI office-bearers said that reduction in regulatory duty would boost competitiveness of the industrial sector. They said that Pakistani merchandise was facing problems in the international market due to high cost, but now the situation would get better.

“The Self-assessment Scheme is commendable,” they said, and also welcomed reduction in tax on vehicles.