On Monday, Deputy Minister of Economic Affairs Hafeez Shaikh published the Pakistan Economic Survey in fiscal year 2018-19. Since the economy did not achieve nearly all of the goals laid out in the budget for the previous year, the tone of the economic advisers was clearly excuse-focused, and there was a clear strategy to blame the entire government for poor economic performance this year. In fact, economic performance was poor. We not only achieved almost all economic goals, but also lacked in considerable margins. In fact, the goal placed in the previous budget was very unrealistic because the PML-N government admitted that it would not win the 2018 election and return to power. Such a secluded goal. However, some indicators of the economic survey gave a worse-than-expected verdict on economic performance during the first ten months of this government.
According to Dr. Hafeez Pasha, GDP growth was slightly above the worst 3% of the decade and actually only 2.5%. All economic sectors, particularly the agriculture and manufacturing sectors, have more than doubled their targets, and major crop production has seen negative growth. The fiscal deficit rose to 6.5% of GDP, while the investment to GDP ratio fell to a seven-year low. Inflation surged to 7.5%, but even if the current account deficit fell, exports did not increase even after the depreciation of the rupee over the past 18 months. The government suffered a considerable shortage of income. The negative sentiment between investors and traders in relation to the economy led to the worst growth of the investment seen by the country in 10 years.
Against this negative backdrop, Secretary of State Hammad Azhar announced on Tuesday the current government's first budget amid protests and fierce protests. First we need to be clear. The budget was expected to be difficult. With Pakistan launching the IMF program and concerns about external account deficits and debt burdens from the previous government's consumption-led growth policies, Pakistan's economy will have to stabilize and step on its own to solve serious problems in the country. The economy, and thus austerity, is the way to take the economy out of the constant balance of payment crises now faced every five years over the next few years.
First let me explain the basics of this budget. The government will collect income of about 670 billion rupiah, the tax collection is 555 billion rupees, and the province gets 325 billion rupees. The rest is used for large-scale debt and interest payments (Rs 2900b), defense (Rs 1150b), subsidies and transfers (Rs 830b), subsidies (Rs 270b), and government spending operations (Rs 430b). Along with other spending, it will result in the highest budget deficit in the history of 350 billion rupees (7.2% of GDP). While new taxes are imposed several times, only the wages of less civil servants have been raised. In addition, taxes were imposed on five major export sectors of zero grade.
The biggest problem with this budget is externality. Yesterday Dr. Hafez Pasha said that this budget was unrealistic and unrealistic to the point where it was not serious. The first unrealistic goal is a tax revenue target of 55 million rupees. This year, Pakistan will find it very difficult to collect 400 billion rupees. How can they increase this by 40%? Contractual policy will significantly slow down the economy, reducing spending, and reducing spending will reduce tax revenue. In addition, if investment decreases, corporate taxes will fall and unemployment will rise, resulting in lower income taxes. Then incorporating privatization receipts into your budget is the wrong approach, because you can't explain any privatization in advance in your budget. Another unrealistic assumption is that local governments will exceed 42 billion rupees, because local governments will spend the savings on each component instead of handing over to the federal government. In addition, the spending allocated to PTI's dream project on the construction of poor housing is also questionable, as a huge fiscal deficit is expected.
Another problem with this budget is the regressive nature of the budget, which can be very difficult for this government to be advanced in the months ahead. Regression refers to government policies that affect the poor much poorer than the rich. This budget is full of policy tools to do exactly that. First, almost 70% of the expected increase in tax collection comes from indirect taxes. Indirect taxes have a direct impact on the middle class and the poor in particular. The most important of them is the increase in sales tax on sugar, cooking oil and other important edible items. This will make basic food expensive for the middle class and poor, and will reduce the purchasing power of such people. If electricity and gas are expensive, the inflationary pressure will get worse. In addition, the disposable income of the middle class will be hit. New tax brackets have been reduced. Those who earned 50,000 rupees a month now have to pay 3,500 rupees as income tax before being exempt from tax. Finally, taxes on the previously zero-valued export industry will result in additional unemployment, especially in middle-class labour, increasing poverty. With the decline in exports, the current account crisis will worsen.
As a Khan advocate and PTI voter, I do not hesitate to enormous disappointment with the current budget. This budget is not only in stark contrast to the PTI's election declaration, but also already exacerbates the economic slowdown and negatively affects the standard of living for the general public. Even the most passionate speech can not escape Kansaab from the chaos he created.
Source Link : https://nation.com.pk/13-Jun-2019/regressive-and-unrealistic-the-story-of-budget-2019-20