Yet another pro- rich budget to accelerate the capitalist growth
The budget
The PML-N government presented yet another federal budget for fiscal year 2016-17. Finance Minister Ishaq Dar presented the budget for the upcoming fiscal year 2016-17 on Friday, with an outlay of Rs4.394 trillion – a 7.3 per cent increase over the previous year – and a growth target set at 5.7pc. Dar said per capita income had risen to $1,561 per head, while inflation was down to 2.82%, the lowest in ten years. The finance minister stated the government is targeting to restrict the fiscal deficit at 3.8% of the GDP next year, which he said will be further narrowed to 3.5% of the GDP by 2017-18. Talking about the budgeted tax revenue, Dar said: “Tax collection has increased 7pc which is historic. We will reach our target of Rs3.96tr and we want to push the tax-to-GDP ratio to over 10% next year.” In the longer run, the minister said the government wants to push this ratio up to 14%.
He said exports stood at 18.2 billion dollars with 11 percent decrease between july-2015-2016 as compared to 20.5 billion dollars in the same period in 2012-13 , mainly due to Decline in Global Commodities prices. The minister said imports stood at 32.7 billions dollars between July-April 2015-16 as compared to 33 billion dollars in the same period in 2012-13. A 40 percent increase was recorded in imports of machinery which shows an increase in investment. Defense budget for 2016/17 set at 860 billion rupees, up 11% compare to previous year. Proposes tax breaks for five sectors : leather, surgical goods, carpets, textile and sports.
Announcing development expenditure plans for next year, the finance minister announced a 20pc increase in the PSDP allocation with Rs1.675tr set aside for FY16-17, of which the Federal PSDP makes up Rs800bn. These funds, Dar said, would be utilized for various ongoing and new development schemes. “Gwadar will play an important role in Pakistan’s development in the future, hence we have allocated a special amount in the development budgets,” said the finance minister. For roads and motorways construction, an amount of Rs188bn has been allocated, with the cost of Karachi-Lahore motorway included in the amount. A total of Rs2bn has been set aside for the construction of a State Guest House, while Rs1.02bn has been allocated to the Climate Change Division under the PSDP. This year, Rs115bn will be allocated to the Benazir Income Support Programme for the benefit of 350 million families until June 2016. About 300,000 more families will be inducted in the programme, with each family getting Rs18,500 monthly, he said. Load shedding has been regulated, Dar claimed, adding that an additional 10,000 megawatts would be inducted into the national grid by March 2018.
The finance minister announced allocation of Rs32bn for Diamer Bhasha Dam and Rs42bn for Wasoo dam. He added that other flood dispersion, small and delay dams will also be built. For hydel-energy projects, Dar announced an allocation of Rs61bn for the 969MW Neelum-Jhelum Hydro power Project, Rs16.5bn for Tarbela dam and Rs60bn for other power related projects. The minister said Pakistan Railways engines, bogies, tracks and signal systems will be improved. Rs14bn, he said, has been set aside for purchase of new bogies for railways. Rs37bn has also been set aside for railway employee salaries. The Higher Education Commission (HEC) has received Rs79.5bn for the current fiscal year, which is a 11pc increase, with Dar calling it a “historical increase.”
Temporary Displaced Person (TDP) and security enhancement development programme has received an allotment of Rs100bn for fiscal year 2016-17. For new Industrial plants and expansion, a five year tax credit till June 3, 2019 was announced. To further support industries, custom duty on import of Industrial raw material is being brought down to three pc.
A total of Rs57bn has been set aside for public sector salaries and pensions in the FY16-17 budget, Dar said. Starting July 1, there will be a 10pc ad-hock increase in salaries for all federal government employees, he said. The finance minister announced an increase in the monthly minimum wage, bringing it to Rs14,000. A monthly conveyance allowance of Rs1,000 has been set aside for disabled employees in this budget, he said. Dar proposed 10pc increase in pension for federal employees, with those above 85 years of age receiving a 25pc increase. Family members of deceased pensioners will receive Rs4,000 monthly as compared to the previous budget’s monthly allowance of Rs1,000.
The finance minister, while outlining the economy’s performance in the past two years said: “In the past two years, progress went over 4pc and reached 4.7pc – the highest in eight years.” This would have been better if the cotton crop hadn’t suffered a fall in growth of 28pc,” said Dar while elaborating on this year’s cotton crop, a major source of revenue for Pakistan. To counter the collapse in the agriculture sector, he also announced a decline of Rs400 in Urea prices to Rs1,400 per packet. “We need to take out-of-the-box measures to boost the agriculture sector,” Dar said after announcing the following allocations for agriculture: Rs700bn allocated for agricultural loans
- Markup for these loans brought down to 2pc (NBP, ADB)
- Electricity tariff for tube-wells will be brought down to Rs5.35 per unit, with the govt bearing Rs27bn.
- Duty abolished on fish feed
- 10pc custom duty revoked for export of small fish
- 7pc tax on pesticides revoked
“This house has never seen such a hefty package announced for farmers. I congratulate the agricultural community,” the minister said after announcing the reforms. He added that the government had targeted growth of 5.7pc for fiscal year 2016-17, with an even more ambitious target of 7pc growth for fiscal year 2017-18. The Pakistan Economic Survey on Thursday showed that the government had missed last year’s budgeted GDP growth target by a wide margin, mostly owing to a dismal performance by the agricultural sector. But this was compensated by the industrial sector as the construction and electricity sectors outperformed expectations. The services sector grew at par with the set target, bolstered by an increase in salaries of government employees and defence servicing.
No recipe for masses
There is no doubt that Pakistani economy performing better compare to last few years. The economic growth rate has increased. Fiscal deficit and inflation has decreased. Industrial and services sectors are performing much better. But the lives of working masses remained unchanged as the economic growth left them alone. Despite the improvement in the economy, the wages are still low and most jobs in private sector are casual jobs with low wages.
In the countries like Pakistan, there are two economies. The economy of the elite and rich and the economy of the toiling masses. The economy of the rich and elite is performing better but the economy of the poor and working class is still in crisis. That is why the overwhelming majority of the population is not been able to enjoy the benefits of the growth. At the one hand, elite is making huge profits and amassing huge wealth but on the other hand, the majority still lives in poverty and misery. One class is taking benefits at the expense of the other class. That is how class society works.
If we look at the budget, it is not different from the previous budget as far as the priorities are concerned. The PML-N government once again ignored the economic interests of working masses and poor in the country. In a country where a third of the population can be said to be living on a monthly per adult income of Rs3,000, there can be no other priority more important for the economic policymakers than to ensure that this segment can improve their lives. The meager increase in the salaries of public sector employees and little increase in the minimum wage of private sector workers is not going to solve their economic woes. No family can survive on the meager income of Rs14000 per month. Even the minimum wage is not being implemented in the private sector. An ordinary family of 4 to 5 person at least needs 25000 per month to survive. The rents of transport and housing continue to rise, the costs of food and other daily essentials have increased. The government ignored the rising costs when increased the salaries and pensioners.
The whole focus of this budget and economic policy of this government is to safeguard the interests of international creditors like IMF, World Bank and ADB and to meet its own current expenditures. Than to maximize the profits of its business elite and to help them to concentrate the wealth into few hands. Very low tax to GDP ratio force the governments to borrow more money from international Imperialist financial institutions to plug the gap between income and expenditures.
This budget has failed to address the economic hardships faced by the masses. No effort was made to reduce the tax burden on ordinary people as indirect taxes are still more than 72% of the total taxes. No serious effort was made to increase the direct taxes and to widen the tax base to bring the non tax paying business into tax net. No serious tax reform seems in sight to document the economy and to decrease the size of the black economy.
This budget is based on the ideas of free market economy and neo-liberalism. The whole concept of trickle down affect on the masses through capitalist economic growth is an utter failure in Pakistan and other countries. The budget based on neo-liberal economic policies are going to benefit the ruling class at the expense of the masses. The economic growth on the basis of free market economy will remain joyless and fruitless for working masses. The fundamental policies and approach towards economy needs to be changed. This change should be to improve the living conditions and lives of millions of workers. Peasants, small farmers and poor. Independent political movement of the masses needs to be organized to defend the economic and political interests of the working masses.