Playing Safe
The Federal Budget proposal on June 3, 1989 was eminently predictable and in more ways than one THE NATION has lived upto the ipso facto “I told you so” statement, particularly in the rendering of the verdict, “Read her Lips, No new taxes?” published on May 30, 1989. Ms Benazir had limited choices, she had to steer a safe course in the given circumstances and to the extent of putting the wind out of the sails of her political opponents, she has certainly succeeded. In this country and in this situation this has been no mean achievement, particularly as she stood to be exposed to the cynosure of the world Press during her US visit this week, troops and police battling demonstrators would hardly be the fitting images on prime time US TV of any democracy, fledgling or otherwise.
The obvious means of imposing direct taxation affecting the common man has been avoided, there is a haunting residual effect left in the mouth about impending inflation because the water and electricity rates have not yet been touched, user charges being a fundamental IMF conditionality and it is like an impending Sword of Damocles. Possibly the Venezuelan and Jordanian experience convinced the IMF that street power must be left alone, the safer method is to make enhancements a la gas (December 1988 — 40%) without any fanfare. Whatever the PM may claim, there has to be inflation, it may not be rampant, that in itself is fairly satisfactory.
Politics has its own dynamics, with the advent of high-tech in the media it has become an art in the successful projecting of favourable images, compromising on principles is a daily affair and survival is the first priority. Ms Benazir is a sophisticated politician, she revised an earlier decision to tax the Armed Forces’ sacred cows, the various Foundations, on live TV, non-plussing her financial scapegoat, Mr Ehsanul Haq Peracha, who having been the target of IJI heckling was by then shell shocked and showed no emotion or reaction to backtracking on an issue which he had earlier happily received plaudits by the thumping of desks by PPP stalwarts. By and large, Mr Peracha’s performance was as lack-lustre as the Budget, if in fact austerity he was propagating he had much to be modest about. By prompting him from time to time and even getting up to coach him during the course of his speech the PM got her message across, she has the welfare of the Peoples Government at heart by not fooling around with potential beehives. The Defence Budget has registered a modest increase, though in terms of over-all share of the cake it has in real terms gone down.
The Federal Budget has been a far cry from the Peoples Party manifesto, only lip-service has been given to various schemes, to the credit of Mr Peracha, he clearly mentioned this as an option but the PPP went in for reservation, the alternative being to impose more direct taxes. The Karachi Stock Exchange in a clear response to the Budget was “lifeless” during a special post-Budget session on Budget night, Ms Benazir could not have hoped for better, it is in her political interest to maintain a semblance of status quo while making creeping changes and to that extent her game plan is working. This is as it should be, she has no self-imposed commitment to commit public hari-kari, first she has to spend more time in the chair, to stabilise her government further, to get her loyalists into all sensitive places, to get a firm grip on the machinery of government before making any moves, this is good political expediency at work. We do not expect that within 6 months of reaching the chair the PM will attempt any real Suzuki-isation of the Federal Budget but Mr Peracha momentarily went out of character and made a clear inherent threat to curb the blatant misuse of telephone and transport by public officials, it is to be seen whether the government has the political will of putting these curbs into effect or these will remain mere lip-service. On the other hand, a politically elected government with a charismatic leader like Ms Benazir can afford to take on the establishment in respect of the misuse of public funds, she will have total people support behind her and politically her opponents cannot afford to question her in this regard, her only fear is the inbuilt capacity of bureaucracy to conduct guerilla warfare within the system to upset the business of government.
To an extent she has shown flashes of steel, the imposition of a form of Capital Gains taxes on property, cars, etc, reduction of initial depreciation are pointers of what to expect when she really gets going. One can have no doubt that she intends to go the “tough” route in time, but in some cases she should have gone further and has not done so, e.g. removal of artificial subsidy on jute goods manufacturing, flat capacity tax on industries instead of lining of the pockets of Excise and Taxation staff, clear policy annunciation of measures to plug tax revenue leakages, etc.
Electricity and water have been left alone, which is as it should be for the poor but one strongly believes that beyond a certain number of units, electricity rates should be enhanced progressively on a multiple proportionate basis so that those individuals who use more electricity for domestic purposes should simply pay for it on an escalated scale, something like Fuel Adjustment Charges (FAC). Similarly it stands to reason that those who have big gardens and spend much more water cannot be equated to the poor in Lyari, Korangi, Shirin Jinnah Colony, etc who stand for hours for a simple bucket of water, hardly potable at that. One opines that she has missed a golden opportunity to get in more revenues and satisfy IMF conditionalities at the same time.
As predicted her reliance is on external and internal borrowings, given the tax proposals she had few other options to run the business of government. Mr Peracha was defensive when he made the remark that internal bank borrowings would be within normal limits while his exultation on the increased external loans can hardly be something to get excited about. The government has indicated a resolve to have a go at the textile quota problem with US and EEC countries, an early solution to the opening up of their markets to our products will go a long way in balancing our perennial hard cash problems, maybe keep our children off the dole even. Practical measures have to be effected, those that will ensure that our exportable surpluses have ready access to markets that are presently closed to us. This can be done by exploiting Ms Benazir’s international credibility as much as reasonably possible, i.e. without turning off our present well-wishers. Ms Benazir is making an address to a joint session of the US Congress, this is a unique honour given to her and to Pakistan and given the fact that she will be the first Pakistan PM to do so one does not doubt that she will do us proud. For Pakistan this presents a historic opportunity to get what we have desired in our wildest imaginations, an unrestricted opening up of the vast US markets to our cotton textiles. If only she can get that message across, Pakistan will be well-served for many decades. She has the ability and now has the opportunity, one hopes that she will not blow it by straying to other favourite themes away from what should be the only national commercial aim, to increase our productivity that is directly based on our own natural resources.
Very correctly, maximum effort is directed at power generation, the fuel of stable economic growth, with the private sector being asked to play a suitable part. The gap between supply and demand is ever-widening and given the suspicion of the west regarding our nuclear ambitions, we have to rely more and more on our own natural resources, water and thermal. Now she has to keep her Board of Investment corruption-free, given the present bureaucratic complement it will be quite a feat. She has increased the allocations for the Peoples Programme but one feels she must compromise on this issue and bring the provinces somehow into the fold, the adverse propaganda will effect all her good intentions and make the Programme a non-starter, God knows that our poor masses really need all the succour they can get.
One cannot see how moral principles can accept any black money laundering scheme, true the present proposal is oriented towards industrialisation but it also tacitly accepts that the next generation of nouveau industrialists will be known law-breakers, an unusual absorption of criminal elements into society, giving a very wrong signal to our youth, the acceptance that those who can break the law can also afford to get away with it. This is not acceptable, it has been tried before but with mixed results, it has bad vibes for the national psyche, particularly in regard to our perceptions about corruption.
Some elements of her true Budgetary proposals have not been aired and very rightly so, the reliance on hastening up of the creeping devaluation process to generate more Pakistani Rupees, possible help from friendly Muslim countries, mid-term taxation measures, etc. One expects that we will see many changes in the Budget proposal before we finally come to an agreed formula, some of the changes will definitely come mid-stream, howsoever much the Government may deny it. This budget exercise was meant not only to temporarily qualm the peoples fears but also to confound the opposition, no doubt they were struck dumb, which by itself is surprising because the PM had been talking about a “tough” budget but had made a complete turnaround only a few days back clearly indicating that a change in priorities had come about and the budget would be a fairly routine affair as THE NATION had predicted. Somewhere the IJI strategists became so complacent that in effect they have been caught napping. They should stand up and own the fact that the lady has done them in, effectively out-manoeuvred them. She played for time and she has got it. The LONG MARCH may yet come about but it won’t be a real people thing and it will be for any reason but the Federal Budget.
Given the prevailing political and economic circumstances, we could have hardly expected drastic changes, Ms Benazir has said that this was an innovative budget, unfortunately it has been innovative only to the extent that it played safe. Dr Mahbubul Haq, with all his chameleon economic theories used to come up with more innovations, theoretical rather than practical perhaps but certainly imaginative. In fairness to the PPP, an elected government has to answer to the people rather than one that is non-representative, as Mr Junejo found out during what was his finest hour in the National Assembly in 1987. Dr Mahbubul Haq had a captive audience in 1988 so to say and even then his innovations came to naught. Ms Benazir’s budget is innovative to the extent that it steered a safe course through perilous waters, an A for effort, political sensitivity and maturity. Some day she has to bite the bullet but the day has not yet come, she must gain greater political strength. To that end one cannot by any stretch of imagination equate this Federal Budget to her known penchant and capabilities to seek economic succour for the masses.
One can only hope that all sides will play by the code of democratic behaviour, Ms Benazir has opted for lobbing the ball into the IJI court instead of trying to smash it, she is playing safe!
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