‘The time has come’ the Warlus said
‘to talk of many things: of shoes -- and ships -- and sealing wax -- of
cabbages -- and kings --’
There are two
ways of reducing the gap between revenue and expenditure. Our kings --
and queen(s) -- usually think of only one: increasing the revenue, which,
is generally done through borrowing or taxation or both. Yet, another alternative
has always been there: reducing the expenditure -- the wrong kind of expenditure.
Expenditure
which either eats up the stock of capital goods more than it adds to it
or adds such ‘items’ as make the rich few richer at the cost of the rest
certainly needs to be curtailed, if not eradicated completely.
The problem
is that the ‘unhallowed hands’* of the king’s vizier -- called modern economist
-- have deliberately disturbed ‘the wisdom of our ancestors’ that all debt
is evil (and therefore ‘the country’s done for’). The modern economist
has told the king that borrowing may not be bad after all, for it can help
to mobilise resources and stimulate activity. But he has forgotten that
a king is a king -- the king is always more interested in his rule than
in the economic wisdom necessary for following the vizier’s advice with
discretion.
So the kings
and queen(s) continue to borrow and tax for the wrong kind of expenditure
-- palaces and courts and coaches and apparel and adornments and merry
making. The kings and the queen(s) and the nobility live happily ever after.
The subjects suffer. This is morally despicable -- and very bad economics,
for there is no factor of production more important -- economically and
socially -- than man. Who knows, the son of a pauper might turn out to
be another Einstein or an Edison or a Lee Iacocca or, if nothing else,
the average, very innovative entrepreneur who is so essential for the pervasive
development of an economy. When a tiny fraction of the whole population,
‘the nobility’, uses the magic wand it has -- demand (which is not needs
and requirements of the economy -- it is money votes to produce whatever
is voted for) -- for palaces and adornments, while the majority, containing
millions and millions of potential innovators, entrepreneurs, thinkers
and skilled workers, cannot even get the share of resources to get out
of the vicious trap of poverty which confines their potential to the most
menial of chores for the rest of their lives -- generation after generation,
a lot of rethinking needs to be done. The problem then is not the budget.
It is the structure of the economy -- and the kings and the queens and
the nobility. The big question is: will we ever find an ‘Umar bin ‘Abd
al-‘Aziz to get rid of the cruel traditions of monarchy? (Hello! Hello!
Imran Khan. Hello! What are you up to? Everyone is waiting. Can you be
the ‘Umar bin ‘Abd al-‘Aziz the country needs? Or are you also going to
be another king?).
O
In the following
pages, statistical analyses of the budget have been presented, which, it
is hoped, will be intelligible to the layman. Figures in the bold print
are particularly noteworthy.
O
After the statistical
analyses, excerpts from different articles on the budget have been given.
Although the editors may not share all the views expressed in the excerpts,
they feel that the readers might find some interesting information and
opinions in these passages.
STATISTICAL ANALYSIS
I. REVENUE BUDGET
A. Current Revenue
|
Billion Rs.
|
%
|
1. Tax Revenue
|
|
|
a) Direct
taxes
b) Indirect
taxes
|
86
210
|
29
71*
|
Rs.
%
Sales tax
57
27
Customs
98
47
Federal Excise 55
26
------ ------
210
100
==== ====
|
|
------
100
====
|
Total tax revenue
|
296
|
72
|
2. Non-tax revenue
(Income from property and enterprises)
|
91
|
22
|
3. Surcharges (Natural gas and petroleum)
|
26
|
06
|
Total gross revenue receipts
|
-------
413
|
-------
100
====
|
Less: share of provinces
|
133
|
|
Net revenue
|
-------
280
=====
|
|
|
|
|
B. Current Expenditure
|
Billion Rs.
|
%
|
1. Debt servicing
2. Defence
3. Other administrative services
4. Grants to provinces, AJK, Railways, etc.
5. Subsidies
Total revenue expenditure |
186
131
48
22
08
-------
395
|
47
33
12
06
02
-------
100
|
Less: Deficit in revenue budget
|
115
|
====
|
|
-------
280
====
|
|
II. ANNUAL DEVELOPMENT PLAN
|
|
|
A. Development Expenditure
|
|
|
|
Billion Rs.
|
%
|
1. Federal government
|
80
|
76
|
Rs. %
Federal Ministries divisions 44
55
Corporations
28 35
------ ------
80 100
==== ====
|
|
|
2. Provincial Programmes
|
25
|
24
|
Rs. %
Punjab
9 36
Sindh
8 32
NWFP
5 20
Baluchistan
3 12
------ ------
25 100
==== ====
|
-------
|
-------
|
Total development expenditure
|
105
===
|
100
====
|
B. Financing Pattern
|
|
|
|
Billion Rs.
|
%
|
1. External resources
|
103
|
65
|
Rs. %
a) Project aid
61 60
b) Non-project aid
42 40
------ ------
103 100
==== ====
|
|
|
2. Net capital receipts
|
26
|
16
|
Rs.
a) Receipts
78
b) Disbursements
(52)
------
26
====
|
|
|
3. PSDP Financing
|
28
|
18
|
Rs. %
a) From Privatisation Fund
14 50
b) Self-financing by provinces 14
50
------ ------
28 100
==== ====
|
|
|
4. Financing of National Drainage
Prog. by Punjab
& Sindh
(around Rs. 1 billion
each).
|
2
|
1
|
|
-------
159
====
|
-------
100
====
|
C. Balance
|
Billion Rs.
|
|
1. Total Resources
2. Total development expenditure
|
159
105
--------
54
=====
|
|
III GAP
|
|
|
|
Billion Rs.
|
|
1. Expenditure
|
500
|
|
Rs. %
Revenue expenditure
395 79
Development expenditure 105
21
------ ------
500 100
==== ====
|
|
|
1. Total Resources
|
439
|
|
Rs. %
Revenue receipts
280 64
Capital receipts
26 06
Privatisation proceeds and
provincial selffinancing
of PSDP
30 7
Foreign Aid
103 23
------ ------
439 100
==== ====
|
|
|
Gap
|
------
61
====
|
|
IV TACKLING GAP
|
|
|
|
Billion Rs.
|
|
Gap
Less: Bank borrowing
Unexplained
|
61
20
-------
41
=====
|
|
V. NEW TAXATION MEASURES
|
|
|
|
Billion Rs.
|
%
|
1. Direct taxes
|
4.3
|
10
|
Rs. %
Income tax
2.50 58
Foreign travel
1.00 23
Capital value tax
0. 60 14
Wealth tax
0.20 5
------ ------
4.30 100
==== ====
|
|
|
2. Indirect taxes
|
36.55
|
90
|
Rs. %
General sales tax
25.30 71
Custom duties
7.60 21
Central excise
2.15 06
Admn. improvement
1.00 2
------ ------
36.55 100
==== ====
|
|
|
Total new taxes
|
--------
40.85
=====
|
--------
100
=====
|
VI. DEBT SERVICING
|
|
|
A. Break-up of debt servicing expenditure
|
|
|
|
Billion Rs.
|
%
|
1. Domestic debt servicing
2. Foreign debt servicing
|
113
73
|
61
39
|
Rs. %
Foreign debt servicing
28 38
Foreign debtretirement
45 62
------ -------
73 100
==== =====
|
|
|
Total debt servicing
|
-------
186
====
|
-------
100
====
|
|
|
|
B. Debt servicing as a percentage
of revenue and expenditure
1. Debt servicing (Rs. 186 billion) as
a %age of current revenue (Rs. 413)
(that is of revenue receipts) |
186
--------x100 = 45%
413 |
2. Debt servicing (Rs. 186 billion) as
a %age of current expenditure
(Rs. 395 billion)
|
186
--------x100 = 47%
395
|
3. Percentage increase over last year
Debt servicing this year (1996-97)
Debt servicing last year
Increase in debt servicing |
Billion Rs . %
186
--
157
--
------- -------
29
18
==== ====
|
(Total government borrowing from the domestic market last
year Rs. 39.5 billion)
BUDGET NUGGET -- EXCERPTS FROM ARTICLES ON THE BUDGET
Some breath-taking
extravagance that characterises government spending has been brought out
by Qudsia Akhlaque in The Nation. She points out that the Prime Minister’s
new secretariat will cost an extra 153.8 million rupees this year, to bring
the total up to 793.3 million rupees. 445 million rupees have been spent
so far on accommodation for parliamentarians in the form of parliamentary
lodges, for which another 25 million rupees has been allocated (what becomes
of these lodges if parliamentarians are given the plots they want on Quaid-i-Azam
University land is a question that no one has yet asked). A further 56
million rupees have been aside for the Prime Minister’s House, and over
7 million rupees for the President’s swimming pool. The furniture for the
Prime Minister’s Secretariat will cost more than what the federal government
plans to spend in the whole of 1996-97 on the women’s action programme
run by the women’s development division.
There is a
remedy. The citizens need to teach the state a lesson. No matter what the
donors do, the future cannot be held hostage to the stupidity and greed
of the state managers. If the people don’t want the state to be run in
this way, if they can’t pay the price of running the state in this way,
they should simply say that they won’t pay. Not individually but collectively,
in large numbers. With calmness, discipline and organisation, they should
simply refuse to pay the bills that the state sends them.
Zia Mian, Guns or Butter? (Newsline,
June 1996)
In deference
to the 1996-97 Finance Bill, all VIPs will now get an 80 to 500 percent
inflated salary package along with dozens of allowances and honorariums.
Besides exemptions on taxes and duties, the VIPs will get free first and
business class air-tickets, massive medical allowances, and the Pakistan
government will foot their gas, telephone and electricity bills. These
are but a few of the small favours that these well-deserving folks will
be granted through that most open and flexible of all accounts, the national
exchequer....
....These
perks, which have already been granted through a Presidential Ordinance,
will no doubt sail through the National Assembly. And the man on the street
in the Islamic Republic of Pakistan will be expected to tighten his belt
and brace himself up for yet another year of economic discontent....
....The President
of Pakistan’s monthly salary of 23,000 rupees has been made tax-free. Because
he is not an executive of a corporate firm, their is no question of taxing
the millions of rupees of allowances he draws every year. And by and by,
every allowance the president gets has increased in ratio by, at least,
a 100 to 500 percent. The President is also allowed to import one car of
whatever make and engine power that suits his fancy, absolutely duty-free.
Unfortunately,
the perks don’t stop here. When Mr President retires from his job, our
sorry country will have to continue footing the bills for his pension,
allowances, his phone and the salaries of his domestic help as long as
he is alive -- bills running into millions of rupees each year....
....The Prime
Minister of the Islamic Republic of Pakistan is not one, as we all know,
to be left behind. Like the President, the Prime Minister was also given
a raise of at least 100 to 500 percent in the present salary and allowances.
The Prime Minister is also allowed to import a duty-free car of any make
and power.
Federal ministers
also a got a similar raise in both salary and allowances -- 100 to 500
percent. In addition, they will be entitled to an sumptuary allowance of
6,000 rupees per month, and 100,000 rupees to furnish their official residence....
....The standing
committees, in addition to the salary allowance and facilities admissible
to them as members of the committees, are entitled to an honorarium of
7,700 rupees per month and an additional telephone with a utility limit
of 5,000 rupees, a 1300 cc car and 360 litres of petrol for local use,
installation of telephones at their residence in Islamabad at government
expenses and exemption of rental and payments of charges of calls up to
an upper limit of 2,500 rupees per month.
Members of
parliament will get an 80 percent raise in their allowances and are now
entitled to travel business class instead of economy class on domestic
flights and first class on international flights -- all at government expense,
of course.
Amir Zia, Let Them Eat Cake! (Newsline,
June 1996)
With every
new budget, the common man’s first concern is to determine how his own
family’s budget will be affected. That, however, is only one side of the
balance sheet that constitutes a budget: the real test is not just to see
who pays how much, but to see who get how much.
Governments first decide upon their expenditures and
then set about taxing people to pay for these outlays. In our case, the
government in the 1996-97 budget has beaten all records of imposing hefty
new taxes on the hapless people of this country; it hopes to realise from
us, whether we like it or not, as much as 41 billion rupees in additional
taxes while all the old taxes go on skinning us. This will still leave
a gap of 20 billion rupees in the budget to be filled in by printing currency
notes -- which is in itself a very bad form of taxation for the poorer
sections of the population.
Doubtless,
it is a matter of great concern as to how much one will have to pay the
government, but this had better be juxtaposed with ascertaining who will
become fat or fatter still as a result of government expenditures....
....Many a
senior bureaucrat can be heard complaining that a secretary to the government,
who is required to control hundreds or thousands of millions in expenditures,
is paid less than a callow junior executive in a big commercial company.
But this executive ignores his own perks, both legitimate and undue. It
turns out that the complaint of officials in the high rungs of the bureaucracy
are less than convincing, while the lower level employees do deserve sympathy
because they are given no perks....
....The contrast
between the poverty... with the opulence of some of the money bags is there
for all to see. The point is that the substantial gainers that corner most
of the sum paid out as debt servicing are usually large income holders
who are being made richer still. And the poorer sections are being made
poorer by the amount of new levies and indirect taxes. The latter group’s
standards of living are being depressed by the government as it causes
the persistently high rates of inflation and fails to provide gainful employment
to most able bodies persons amounting to a fifth of the total adult population....
....The government
does not take loans from Pakistanis alone. Nearly half its accumulated
debts come from foreign sources, mostly governments. So far the rates of
interest on them have been low, mainly in comparison with what the government
is forced to pay domestic creditors. Whatever is paid out to foreigners
is a reduction in the national wealth at any given point of time and if
some or most of these loans are not utilised to the best advantage, the
repayments and interest payments represent an element of extortion by the
government’s executing agencies, again enriching the higher rungs of bureaucracy
at the expense of the common Pakistani.
The government
has regular policies under which it determines which taxes should be imposed
and which sectors of the population are to be burdened with them. There
used to be the principle of equity in taxes. In meant that more was taken
from those who were rich enough to pay and less was taken from those whose
ability to pay is small. But no such equity is practised today. Nearly
80 percent of the government revenues come from the poorer sections of
the population. And the tiny topmost richest group does not even pay 10
percent of the total expenditure of the government, which now stands at
500 billion rupees. All new taxes that have been imposed this year are
indirect taxes that fall on all: on the poorest men and women in less developed
areas and villages as well as the Saigols and Munnoos of this land. The
greater the imposts, the greater the pain for the poorer buyer of the goods
carrying GST and other indirect imposts. On the Saigols and Munnoos, the
impact of these measures will remain wholly unnoticeable....
The third
largest item of government expenditure is so-called development through
the Annual Development Plan (ADP). if the financial stringency during the
course of the coming year does not impose further cuts. The ADP has fluctuated
and has always been, in recent years, smaller than defence outlays. Since
most of the ADP is financed by foreign loans or note printing, the impact
on the poorer sections is initially adverse, the pain of which could be,
in theory, later alleviated if the expenditures had been prudent and the
resulting development was of the kind that could promote prosperity for
all and more employment for the needy.
As it happens, most of the ADP is a hoax in the sense
that the expenditures mostly comprise just enough to keep a project ticking
over....
....The much
smaller economy of Bangladesh is able to earmark Taka 125 billion for the
period for which Pakistan has set aside 105 billion rupees only....
....Only a
few prestigious projects are speedily completed. The rest are starved of
funds and the money actually provided is spent only on the salaries and
perks of project directors, their jeeps, drivers....
....The fourth
largest item of expenditure is on internal security services, in other
words the police force of all shapes and hues. The economic consequence
of increasing the number of those who live below the poverty line and the
impact of ever rising prices on the lower income groups can be linked to
the rising crime rate and spreading lawlessness. Most of the expenditures
on the security services do the same job as in other government outlays:
they enrich all the top echelons of the police bureaucracy and pay measly
salaries to constables and even ASIs or SIs. That is why they resort to
extortion. What the police does to finance itself through unauthorised
taxation of citizens needs no elaboration. The effect on the distribution
of national incomes is exactly the same as in other categories of taxation.
Finally, there
is the small amount of money, within eight percent of total outlays, which
is spent on the social sectors: social and population welfare, health,
education, research, science and technology and what are called community,
economic and social services. These tiny sectors, in terms of money allocated,
are the poor relations of the main branches of the bureaucracy and suffer
frequent cuts. However the maximum benefit to the economy and nation accrues
from the small spending on these social sectors.
Thus the overall
scheme of the budget leads to further impoverishment of the largest number
of Pakistanis while it steadily and speedily enriches a small group, perhaps
five to ten percent of the top 20 percent of the population. If income
disparities produce dangerous consequences, Pakistan is a likely candidate
to suffer all of them.
M B Naqvi, Whose Budget is it Anyway?
(Newsline, June 1996)
|