A Reasonable Budget
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.
Mixed Signals
The President of Pakistan, General Parvez Musharraf, met US President Bush in New York last Sunday evening. Earlier, he had addressed the UN General Assembly. Given that after sending democracy into temporary limbo he became an international pariah a scant two years (and a month ago), for the Pakistani President the visit has been a triumph of sorts, for the personal risks he has taken in the last 60 days it brought only mixed rewards. In meetings en route in Teheran, Istanbul, Paris and London, Parvez Musharraf scored heavily in getting effusive support for Pakistan as a frontline state in the “war on terrorism”. But it was the last stop that counted. Under dire pressure from the frenzy building in the streets, the Pakistani intelligentsia had high hopes that the US would take concrete and tangible measures to reverse the Pakistani public perception that the US is friendly with Pakistan only when it has use for it, and then leaves Pakistan to fend for itself in paying the economic and political price for the privilege of that rather limited (by need) friendship.
As a symbol of tangible support, Pakistan needed debt relief that would be more like debt forgiveness, something that would more than offset the political and economic fallout being acutely felt in Pakistan because of the US attack on Afghanistan. Pakistan suffered economically (and continues to suffer) because we were then left in the lurch after the Afghan War in the 80s, sad experience shows that the present aid package announced for Pakistan is meagre compared to the economic hardships that the present Afghan War is now forcing on Pakistan. US$ 1 billion is hardly peanuts, but in the context of what we really need it may as well as be chicken feed. One must be grateful for small blessings however, for even the US$ 1 billion aid package that we did get will ameliorate to a small extent the burden of the war which is being increasingly felt in the streets and homes of Pakistan. In material terms it may be in lost man hours and in export manufacturing orders, in emotional terms the cost cannot even begin to be counted.