Federal Budget

No respite for the multitude in budget

No respite for the multitude in budget

Pakistan

No respite for the multitude in budget (Image: INP)

By Javed Iqbal

In Pakistan, it has become commonplace for democratic governments to unveil populist budgets during election years, driven by the desire to secure victory in the polls.

These budgets are crafted to lure voters through a range of incentives, including subsidies, increased spending on development programmes, a raise in salaries and prioritisation of glitzy schemes. The aim is to appease various interest groups such as officers, industrialists and the select few with the expectation of gaining their support at the ballots.

However, these budgetary measures often exert additional strain on the nation's already fragile economy, potentially resulting in inflation and an accumulation of debt.

Despite the associated risks, governments continue announcing such politically-motivated budgets in pursuit of widespread support.

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Pakistan's economic situation is deeply concerning which is evident by a 3% contraction in the growth sector and a meagre 0.3% growth in GDP. Moreover, the government is grappling with soaring debts, necessitating a massive inflow of $24 billion to fulfill its external loan obligations. Astonishingly, despite the inefficiency and lack of productivity in the public sector, the cash-strapped federal government has chosen to increase salaries by up to 35%.

This decision raises questions about the government's priorities, particularly considering the absence of accountability and performance audits within the public sector. Despite a significant rise in external borrowings, the past year witnessed a decline in demand, investment and overall economic growth. It is imperative for Pakistan, as economic experts assert, to urgently implement sound economic policies and adopt prudent measures to effectively tackle these compounding challenges. There is not a single policy statement on how to tackle the economic marsh currently engulfing resources.

The country finds itself in a state of deep concern and perplexity due to the staggering fiscal deficit of around Rs7 trillion, the highest ever recorded in history. The situation is further compounded by the Federal Board of Revenue's failure to meet its budgeted target of Rs7.47 trillion in the outgoing fiscal year, painting a bleak picture of the economic landscape.

One of the primary reasons behind this unprecedented and substantial increase in the deficit is the government's uncontrolled expenditure on employees' salaries and pensions. It is of utmost importance to acknowledge that the government bears the responsibility of ensuring financial stability and such significant shortfalls in revenue collection can have far-reaching implications that hamper the country's economic development and progress. Thus, it is imperative for the authorities to thoroughly reassess their spending policies to restore balance and avert future financial cataclysm.

It is widely known that the Pakistani government is currently grappling with a severe socio-political and financial crisis. The recent revelation of a transfer of Rs5.27 trillion to the provinces from the divisible pool only highlights the government's ongoing struggle to fulfill its financial obligations. Alarming as it may be, once this transfer is completed, the federal government will be left with a mere Rs6.89 trillion. To compound matters, interest payments alone will amount to Rs7.3 trillion, worsening the already inflated deficit.

One cannot help but question the motive behind the unprecedented increase in salaries and pensions for government employees. Could it be an attempt to garner support from the civil machinery ahead of the upcoming general election? The decision to increase government salaries has undoubtedly raised eyebrows and many are skeptical about the underlying intentions behind this pay hike. Only time will unveil the true nature of this financially precarious decision.

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The upcoming year is poised to witness a remarkable surge in pension expenses for federal employees, with an incredible 17.5% increase. The projected total expenses are expected to reach an astonishing Rs761 billion! To put this into perspective, it surpasses the combined salaries of all federal employees, which amounts to Rs714 billion. These figures may initially appear staggering, but they emphasise the critical volume of retirement planning.

On the other hand, ordinary citizens and employees of private organisations bear the brunt of the consequences. They are left grappling with exorbitant prices for necessities, struggling to make ends meet. The absence of effective relief measures in the budget has left them stranded in a sea of financial hardships. It is high time for policymakers to wake up from their slumber and take swift action before it's too late. The nation deserves far better than the current state of affairs.

In short, the budget is filled with populist measures that prioritise short-term popularity over economic realities, resulting in inefficient public spending. Former finmin Miftah Ismail has expressed concern over the current financial situation. The anticipated income of Rs9,200 billion and the expenses of Rs1,350 billion paint a grim picture and the burden of a 21% interest rate only exacerbates the problem. Adding to the concern is the fact that only 30,000 out of 2.2 million shops fulfill their tax obligations, Miftah said. The government wants major businesses to pay a 44% tax rate, another red signal for entrepreneurs.

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Shahid Kardar says following the implementation of the 18th amendment to the constitution, the federal government still comprises 43 divisions, encompassing more than 400 attached departments with an astonishing 650,000 officials. Furthermore, there exists a multitude of autonomous bodies with 520,000 employees, all supervised by dozens of regulatory agencies having thousands of officers. This unprecedented level of bureaucracy raises significant concerns regarding its effectiveness and feasibility.

Considering the parallel proliferation of bureaucracy within provinces, it becomes imperative to thoroughly examine the system and undertake a comprehensive overhaul to ensure optimal operational efficiency. The current situation demands critical evaluation and reform to streamline processes, eliminate redundancies and enhance accountability in governance.

The public sector must undergo a significant transformation. There is an urgent need for greater accountability, transparency and a focus on merit-based performance.