Annual Budgets always arouse expectations, the Budget being presented before the National Assembly after four years (and that also with the confrontation over LFO as a backdrop) added to the anticipation. The good thing about the Budget is that no new taxes have been levied, either in the form of direct taxes or change in administrative/utility prices. This goes towards the business community’s demand of a consistency in government policies. For the first time the government has more or less achieved the target of the tax revenues i.e. Rs.459 billion against the revised Rs.460 billion figure. An important achievement has been that the number of income tax-payers has been rising, now close to 2 million (at one time a few years ago it was only 1.1 million). There is some improvement in bringing down the size of fiscal deficit as a percentage of GDP. The advance tax regime for foreign investors is a good initiative, this should be expanded to include the domestic corporate sector.
Incentives to the housing sector give multiple benefits to Pakistan across the board. Firstly, it provides much needed ownership of housing to our needy citizens, secondly it reinvigorates the economy. Enhanced “housing starts” means that more cement, brick, steel, sand, steel plumbing and electrical material, household gadgets, etc will all be needed. Since almost everything is available or made in Pakistan, jobs will not only be created in construction but the whole lot of support industries will add more and more jobs and turn out additional material resulting in economy of scale and bringing down prices, force-multiplying consumer sales of many household products i.e. there will be spin-offs in all directions, a very direct infusion to the economy. Banks have to be careful in verifying applications and spreading the installment /mark-up in payable lots, we cannot afford to go down the way the “Savings and Loans” (S&L) schemes did in the US, it took a trillion plus US dollars to bail out the banks. Moreover with increases in sales, competition will become intense, thus enhancing the quality of the products. Care also has to be taken of constructing small housing colonies in rural areas to encourage the farmers that their quality of life can be enhanced in their own rural environment rather than moving to the comforts of the urban areas and putting pressure on the urban areas, adding to multiple problems because of unemployment, including law and order.
There is nothing more important for re-vitalizing the economy than increasing employment opportunities, the increased cash flow in the economy has a snowball effect that in turn creates more jobs and so on. Maximum emphasis must also be put on population control, with population growth at nearly 3% the highest in the world we have diminishing job slots in Pakistan. Besides 3 million more hungry mouths to feed, we have to create at least 3 million more jobs, impossible even for the most vibrant of economies. That’s why we are playing “catch-up” all the time!
Despite Pakistan’s economic travails and the battering it has taken with respect to fudging of statistics, the State Bank of Pakistan (SBP) survives in international financial perceptions as a credible institution, this reputation derived from being blessed with good leaders. While disagreeing with Dr Yaqub on some issues, among them the freezing of foreign currency accounts which made his inclusion in the military regime’s initial National Security Council incongruous, he ran a very taut ship in deteriorating economic circumstances, balancing the economy on a fail-safe line between the penchant of two successive political governments alternating in taking us down the slippery road to economic apocalypse by contradictory self-serving economic policies. Instead of abandoning ship under fire, Dr Yaqub remained on the burning deck to try and limit damage to the economic fabric of the nation, together with the then Finance Ministers holding off IMF-savaging of our poverty-stricken masses, during this period almost the whole of the lower middle class, mostly salaried persons, slid below the poverty line. Inheriting an exceptionally horrific economic situation but Dr Ishrat Hussain’s no-nonsense performance-oriented abilities have been complemented by the singular authority of a military regime, the perfect recipe prescribed for economic recovery, provided sound policies are conceived and implemented by those who are supposed to do so.