The fiscal fight drags on
June 9, 2020
June 9, 2020
AS the world inches towards global economic depression and people in the mighty United States revolt against racial repression, the economic team in Pakistan is burning the midnight oil to finalise the budget. Will it move the wheels of the economy and provide relief to the lives turned upside down by layoffs, pay cuts and perpetual fear?
Expecting the current team to change the fortunes of the country in a fluid situation appears little difficult. The deepening crisis warrants a deviation from the traditional security-centred framework which might be hard for Team Imran to pursue at this point. Families and farming and business communities are still hoping against hope.
Sensing the mounting difficulties in a shrinking resource base and the growing demands for relief, the elite business lobbies started clamouring for a share in the pie of public funds. They wished to cover their losses and quell the possibility of a disaster tax on the corporate sector.
“It’s not a matter of choice for me. I have to report in office though I am well aware of the health risk. To sustain a family of 10, my two younger brothers work as delivery riders and my sister holds tuition classes at home. The lockdown halved the riders’ income and the tuition teacher lost her business as exams were cancelled. The family now depends on my income,” Sarim, a cashier in a private bank shared his story. “I believe the government can provide relief from the crushing financial stress but only when it cares. To me, the budget is an annual ritual that does little for me and my kind,” the young man said.
In a recent public statement, de facto finance minister Dr Abdul Hafeez Shaikh said the government was aiming to reboot the economy by facilitating businesses impacted by the pandemic. “All possible measures, including the announcement of Rs1.2tr stimulus package, were being adopted to provide the businesses a road to recovery,” he was quoted as saying last week in a virtual meet-up with business leaders.
Talking to Dawn over the phone, farmers Majeed Nizamani, Junaid Hyder Syed and Shakeel Ahmed voiced concerns of the farmers’ community. “Despite a drastic fall in the prices of diesel and petroleum products, freight charges have increased four times, impacting the reach of commodities in domestic and overseas markets,” Mr Hyder said. “Why farmers are being punished for reaping a good harvest is beyond my comprehension.” He pointed out many tangles in the supply chain and lamented 8-10 per cent margins for the middlemen (arthis) even though it is in the range of 3-4pc globally.
Mr Nizamani highlighted the threats to food security in the wake of the rising cost of farming and the locust attack. He was critical of the urban bias in policymaking in a country where a sizeable population depends on agriculture. He doesn’t expect much in the budget for farmers. “They can do it, but they will not,” he said about taking pro-agriculture steps in the budget.
Responding to Dawn’s query, Mohammad Ali Tabba, who serves as CEO of Yunus Textile Mills and Lucky Cement and sits on the boards of more than three dozen companies, said he wanted to see a pro-growth budget. “This is the only way to progress during the next fiscal year.” He added, “No new taxes and rationalisation of the existing ones. The idea is to create consumer demand and new jobs.” Senator Mushahid Hussain Syed, a resolute proponent of the China-Pakistan Economic Corridor (CPEC), called for a poor-friendly budget. He penned four expectations. “I think there should be: (a) no more direct or indirect taxes, (b) pay raise for the salaried class, (c) no more subsidies for the super-rich and (d) austerity within the government.
To a question regarding the creation of fiscal space in the traditional framework, he said: “The budget should help redefine the parameters of Pakistan’s traditional national security paradigm, putting human security as paramount in the wake of the coronavirus crisis. The focus should be on health, hospitals, human resource development and the environment.”
“Our security needs are guaranteed by our nuclear and missile capabilities and I don’t foresee any misadventures from India given the pressures on the Modi government from within and from China, plus their experience of Pulwama. We have a professional military force to ward off any external aggression.”
Pakistan Business Council (PBC) CEO Ehsan Malik said in a webinar last week that to revive industry, taxes must come down and firms must receive incentives. “At a time when world demand has shrunk, we must focus on the domestic market.” He mentioned multiple taxes and regulations that deter growth of industry. He hoped that in the next budget the government would review tax structure and rates.
Sartaj Aziz, former finance minister, has called for a comprehensive revival plan. In his view, agriculture needs special attention because “it is the economy’s backbone”.
Babar Badat, president of the FIATA, the international federation of logistics and freight associations, was disappointed with the government’s performance that he thought had a good leader in Imran Khan besides enlightened and business-friendly people like Abdul Razak Dawood and Asad Umar.
“They need to create a Ministry of Logistics and Transport to leverage the benefits of geographic location and match the growing demands of domestic market,” he said while mentioning that Turkey and Iran are reaping the benefits of stronger logistics sectors. He was not too hopeful regarding the budget and expressed his dismay over the lack of competence in the oversized bureaucracy.Download