Apart from the mainstream opposition parties, many independent economists and economic experts have declared the revised budget of PTI government as non-starter. Some even labeled it as the budget for the elite. PML-N president and leader of the opposition in national assembly declared this revised budget as anti-poor and pro elite. In his speech in the national assembly Shehbaz Sharif rejected the increase in the prices of electricity and gas.
Now the question is whether the PTI government did something new and unfamiliar. The answer is no. PML-N government did the same when it came to the power. It increased the both electricity and gas prices to cut the subsidy and to reduce fiscal deficit. So PTI government is just following the PML-N policies and measures. Then why the PML-N is criticising the PTI government when it is following the footsteps and policies of PML-N.
The opposition parties are targeting PTI government for the sack of opposition. But independent economists, analysts and experts are criticising the government for not fulfilling its pledges and promises of Change and Naya Pakistan. They are criticising this newly elected government for the lack of ideological and policy shift that required to create jobs, increase investments and for the speedy growth of the economy. The revised budget of Rs 5.3 trillion rupees failed to address these issues.
There is hardly any big difference between PTI and PML-N on the economic policies. They both follow the ideology of neo-liberalism and free market economy. Both the parties represent the same ruling class and elite. So they are criticising each other to make the political gains and to tarnish the opponent in the people as anti-poor and enemy of the lower classes.
How PTI justify its revised budget?
Presenting the Finance Supplementary (Amendment) Bill 2018 in the National Assembly, Finance Minister Asad Umar claimed that the mini-budget will help the economy teetering on the brink of collapse. He said the PTI government has introduced steep fiscal adjustment of 2.1% of Gross Domestic Product (GDP), which is equal to Rs814 billion.
The finance minister Asad Umar said the mini budget had to be presented as the current budget was highly unrealistic. “The economic conditions can further deteriorate, if no corrective measures are taken. We are going to take big measures that will directly affect Pakistan’s affluent people,” he announced
But the minister supported the PML-N government’s policy of charging higher withholding tax rates for non-filers of income tax returns. He also allowed non-filers to purchase cars and properties, which is a serious setback to the efforts to broaden the documented economy.
Umar also unveiled tax amnesty for about 800,000 people who had been picked for audit due to their failure to file income tax returns. The withholding tax on banking transactions has been increased to 0.6% for the non-filers. The government also increased the tax burden of people earning more than Rs2.4 million annually.
As a result of this adjustment, the budget deficit that was projected to widen to Rs2.8 trillion or 7.2% of GDP would narrow down to Rs1.9 trillion or 5.1% of GDP, he said, adding that the budget deficit is as bad today as was in 2013, when the Pakistan Muslim League-Nawaz (PML-N) formed government.
The proposed Rs1.9 trillion or 5.1% of GDP budget deficit target is Rs89 billion higher than the original budget deficit target set by the last PML-N government for this fiscal year 2018-19.
After his budget speech, the minister said these are only emergency measures and the economic reforms will be introduced in coming weeks. He described “increasing employment, enhancing economic stability and supporting exports” as top priorities of his government.
However, the fiscal and expenditure measures that Umar unveiled do not fully reflect the PTI’s manifesto. He announced withdrawing tax-free perks of governors and federal ministers but could not dare touch the perquisites being availed by judges and generals.
“It was a conscious decision to withdraw only those perks that are enjoyed by politicians who make decisions on the country’s tax policies,” said the minister, while addressing a press conference after his budget speech.
It was widely believed that the PTI is well prepared and already done his homework to immediately start fulfilling its commitments, pledges and promises. But the month of this newly elected government has revealed that it is ill prepared and wrong-footed as far as economic policies are concerned. It is clear now that PTI economic team and especially finance minister has no emergency plan to deal with the present situation. That is why it failed to make the promised reforms and changes.
Under the circumstances, it forced to simply follow and implement the economic policies of PML-N government. These economic policies are beneficial for the ruling classes and elite at the expense of the working masses and lower middle class. That is why it precisely give concessions to rich and attacked the middle class and poor masses.
Instead of bringing any new sector or class of people in the tax net, the PTI government has increased the burden on the existing taxpayers. The finance minister did not scale back non-development expenditures but has cut the development budget, which will pull down the economic growth rate to a level that will not be sufficient to absorb new entrants in the job market. Pakistan needs high growth rate to create new jobs to reduce the unemployment but austerity and cuts will cut the growth rate. The revised budget will bring down the projected growth rate of 6.2 percent. It will definitely slow down the growth of the economy.
The regulatory duties have also been increased or levied on 612 tariff lines. The sales tax on RLNG is increased. These fiscal adjustments can help Pakistan secure the International Monetary Fund (IMF) bailout programme, provided it decides to avail it to cope with the “grave external sector challenge.”
He reversed a major reform that the PML-N government had introduced to broaden the tax net. His government has permitted the non-filers of the income tax returns to buy cars and property, which the previous government had barred to force people to come in the tax net.
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22 August, 2019