A discussion on the federal budget with Prof Qaiser Aslam
The News on Sunday (TNS): What are the most significant expenditures in the new budget?
Dr Qaiser Aslam (QA): 86.6 percent of the allocations are for current expenditures and only 13.2 percent for development. Out of the current expenditure, 72.34 percent will be spent upon general services that include debt repayments, pensions, salaries and perks among other things. 18.2 percent on defence, 3.5 percent on social protection, 2.4 percent on public order and safety, 1.6 percent on economic affairs, 1.2 percent on education, 0.5 percent on housing, 0.5 percent on health, 0.1 percent on recreation, culture and religion and only Rs 436 million on pollution control.
TNS: How do you think the government plans to finance the increased expenditure while continuing to reduce the fiscal deficit?
QA: In my opinion it is a Rs 3 trillion deficit budget that will be financed mainly through indirect taxes, Rs 500 billion from provinces and some increase in direct taxes, but mainly through bank borrowing and deficit financing.
TNS: What do you see getting more expensive/ cheaper after the new budget?
QA: Petrol and related products will become expensive and transport costs and freight will rise. The same goes for air travel and hotels. Food items like milk and meat and poultry will become more expensive; so will education and medicines. Utility tariffs will also rise. Energy costs will go up as a consequence of increase in petrol prices and taxes. On the same note, luxury items are also getting expensive. Cost of food for the poor and lower middle class will likely decrease through government interventions and subsidies.
TNS: Will the government be able to control the prices?
QA: No, the enforcement, price and quality control mechanisms are outdated, weak and rigged with corrupt officials, therefore there will be no or very little impact on the prices and the economy this year.
TNS: The PTI has set a growth rate target of 4.8 percent. The opposition leaders are saying that even if this achieved this, the economy will have merely returned to 2018 levels. How accurate is this analysis?
QA: A 4.8 percent GDP growth rate can be achieved by allowing black money to be invested or parked in the construction sector and providing tax and tariff cuts for the industry. This will raise the incomes of the top 25 to 30 million people who are part of the capitalist economy. However, the overall lifestyle of the remaining 200 million people will not change as a mechanism of trickledown is still not in place. The government is relying on 19th Century institutions and laws to ring the economy in line with the 21st Century needs. I think the system will not deliver the wishes of the PTI or any other government in the near future.
TNS: The new budget is meant to be people friendly. Some economists have shown optimism about the outcomes. However, others have raised concerns about the government’s ability to apply and continue the new policy especially in light of the fact that major changes in direction still need to be discussed with the IMF. What are your thoughts on this?
QA: The IMF has put a straitjacket on Pakistan’s economy. Our economy is a semi-manufactured goods exporter. We import oil, edible oil, tea, pulses, machines, raw materials and intellectual capital. Only remittances by overseas workers are protecting us from more foreign debt.
We need to diversify and link our SMEs with international markets and produce new value added products for exports. We must also increase productivity of land and labour, especially the youth and create e-entrepreneurs very quickly. Also, we need to change the ways of our institutions and laws to match new economic conditions. We need to teach our children 21st Century skills, knowledge and work habits. This is a tall order. I hope the PTI government understands that the need of the hour is delivering on its promises.
The writer is a staff member