Populist Path
Announced in the National Assembly a few hours after it was deliberately leaked to the media, the thrust of the Federal Budget points to a turn to populism. Not going the whole hog points to General Elections not taking place immediately but possibly later in late 2007, i.e. unless something drastic forces an early 2007 date. Predictably govt ministers and officials, as well as those who support the govt and/or have reason to do so, swarmed the electronic and print media to sing the Budget’s praises. Predictably the Opposition opposed it for the sake of opposition, in a singular feat of negative reaction not one soul in the opposition saw even one iota of good in the entire Budget document. Where has objectivity gone?
The Federal Budget 2007 was better than the last Federal Budget, and since 2006 was better than the one before that, improving the lot of the common man seems to be on the agenda. It is always hard to meet expectations with the revenues available, Shaukat Aziz and his team have done a commendable balancing act under the circumstances. More could have been done for the industry in the same manner as the relief and incentives for farmers, statistics indicate they badly need such support. The govt could have been more sensitive to the plight of pensioners. One must commend the brilliance (and sense of humour) of the person who mandated 15% increase for all pensioners with a proviso of 20% for those who retired before 1977. If anybody retired in 1977 at the age of 60, it would make him 89 or 90 now. The govt will have its work cut out finding the handful who will avail themselves of this generosity.
The reduction of fuel prices will be the definite smoke signal that general elections are due within 6-9 months. The govt will go the full road to populism before that, removing all taxes and profits from fuel and electricity, subsidizing these across the board. They have the fiscal space to do so. There is no “rocket science” behind the fact that reducing energy prices reduces prices down the line. Subsidies should be front-loaded instead at the tail-end as in the case of “pulses”. Mind you, doing so is good and gives some relief to the common man, and more power to the government for forcing the prices of “dal” down. Similarly if the govt had subsidised energy prices, the cost of production and transportation would go down, reducing prices all along the chain down to the tail-ender, including “dal”. The masses have a notoriously short memory and the benefits must remain in the fresh mind of the masses to be of benefit for those who “grant” them this benevolence. As callous as it may sound the reduction of fuel prices is a populist weapon that will be used only when it is needed and only a short time before the elections. The man in the street votes with his pocketbook, put a strain on it and he will start searching for alternatives.
A lot of emphasis is placed on the booming Stock Market as a living symbol of the growing prosperity of the country. While some factors inspiring the boom are commendable, the fluctuations in the share prices have no real relevance to the market indicators that should govern their movement. The ongoing SECP enquiry recognizes that the recent dive in prices is blatant manipulation, the problem is that vested interest always stops any enquiry from narrowing down the manipulators. One leading luminary among our stockbrokers maintains that the Karachi Stock Exchange (KSE) is not a “gambling den” as perceived by most in the intelligentsia as well as the masses, no explanation why the KSE went up after the Nishtar Park blast when it should have gone down. All share prices are inherently a gamble, the institutionalized processes as well as checks and balances of the monitoring agencies in most countries have made it a “calculated risk”. The risk is based on a number of market variables, mainly the company’s own performance. Market indicators do play some role in Pakistan but far from the extent they should.
What is an insult to one’s intelligence is the logical manner criminal transgressions are explained away. To add to the insult, the callous way a holier-than-thou leading stockbroker tried to justify taxes on petroleum products added injury to that insult, reducing the quantity of the already sparse food on the man’s table. Agreeing with the taxes on petroleum products, our “loyal” stockbroker vehemently opposed the proposed levying of miniscule Capital Value Tax (CVT) on share transactions. It is small satisfaction that the Senate has in fact enhanced these in their recommendations on the Finance Bill to the National Assembly. The SECP is investigating the recent inordinate fall in share prices, the share index fell 2500 percentage points and market capitalization came down from Rs 3500 billion to about Rs 2750 billion in 35 trading sessions between April 17 and June 8. Three earlier investigators came to nothing. Will the SECP succeed this time? Two previous Chairman, Khalid Mirza and Tariq Hassan, had done Pakistan and themselves proud by being above board and populating the SECP with capable and honest functionaries dedicated to eliminating wrongdoing. Is Razi-ur-Rehman, a banker of some repute who opted to later join our gang of stockbrokers, upto this sort of commitment? Or will he protect his former club members? That is a US$ 64000 question of conscience that Razi will have to wrestle with. The SECP may penalize some small errant stockbrokers, will Razi’s conscience allow him to go after the fatcats?
While officially inflation is under 10%, that is not the public perception, it is public perception that will hold the governing accountable. Some prices have registered inordinate rise, e.g. sugar from Rs 25 per kg to Rs 40, prices of essentials such as meat, vegetables, etc and house rent, fuel, electricity, transportation, etc have also kept rising and rising, if not on the same scale, over the past several years. International prices rises have certainly contributed to the double-digit inflation, the public will still hold the government responsible. The government itself is on a fail-safe line between working for faster economic growth and providing relief to the masses. Shaukat Aziz is more than capable, executives do not rise to the hierarchy of Citibank on the strength of their blue eyes or Prince Walid’s blessings alone, he inherently has the capacity to deliver for Pakistan as Prime Minister even though he is a technocrat PM in the run-up to a political showdown. Unfortunately he is faced with Hobson’s choice, that between satisfying the fatcats with inordinate influence in the money markets of Pakistan and the poor masses who do not have similar influence but most depend upon him as Prime Minister of the country for salvation from the misery and privation they must presently endure.
We know what a political PM would have done, he would have spread largesse to all and sundry, particularly the poor and the hapless. Shaukat Aziz can only satisfy the destiny his boss, General Pervez Musharraf, has entrusted him with by opting to take the side of the poor of Pakistan and not try and please everyone and his uncle at their cost. Make no mistake, this Budget is certainly a good one, far better than each one previous to it. It is at least a move in the direction of the common man, if not abandoning the concept of “trickle down” economics altogether. But to really ameliorate the condition of our poor down-trodden masses the Budget needs to be far more people-centric than it presently is.
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