Budget and the economy

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Courtesy:- Malik Muhammad Ashraf

The National Assembly, after a two-week long debate, passed the Rs.4.3 trillion budget for 2015-16 on Tuesday, giving it a legal cover. Managing an economy and preparation of budget is indeed a very complex and arduous undertaking, especially with a resource-constrained country like Pakistan. The budgets are not only the statements of revenue raised and expenditures on running the government, but are also an embodiment of an overall economic vision. This is in regards to putting the economy on the path of sustained economic growth, with the ultimate goal of promoting the economic well being of the people through generations of more employment opportunities.
The achievement of these objectives nevertheless depends on a strong economic base. Judging by the budget for 2015-16, and the state of the economy on the standard of the foregoing ingredients, it is not difficult to draw the inference that the economy during the last two years has shown remarkable signs of revival and the budgets presented by the government to fix the maladies afflicting the economy and nudging the growth process have been decidedly much better than the previous governments. The budget deficit which is considered to be the main stumbling block in the way of economic progress has been brought down to 5% of GDP from 8%, with an estimated positive impact of Rs.500 billion. The foreign exchange reserves have increased to $17 billion from $11 billion. Inflation has been restricted to a single digit and the interest rates have been brought down to 7% from 10%, which reflect the robustness of the economy and the confidence of the government in furthering the economic objectives. Another worthy aspect of the economic performance is that during the last year the per capita income registered an increase by 9.3%. The budget for 2015-16 foresees the creation of 2.5 million jobs, through development projects, where striving for full employment is the dream and ultimate aim of any government. It is estimated that Pakistani government would need to create 36 million jobs in the next decade to keep the economic wheel of the country rolling in the desired direction. Keeping this aspect in mind, the target set for generation of jobs in the current budget is not a mean effort by any standard.
The budget for 2015-16 also envisages the reduction of the budget deficit to 4.3% of the GDP, keep the inflation in check, and achieve the growth target of 5.5%.This ostensibly seems achievable in the backdrop of the performance of the economy, during the last two years and the growth maintained during the last fiscal year irrespective of the non-achievement of a number of set targets. Another worth noting measure in the budget is lesser emphasis on indirect taxes, which are ultimately borne by the masses.
A deliberate effort has been made to make a paradigm shift towards direct taxes which is an encouraging strategy as far as giving relief to the masses is concerned. Due care has also been taken to provide relief to the poor class through doubling the allocations for BISP and Baitul Mal, besides raising in the minimum wages and enhancing the salaries of the government employees.In regards to maintaining the pace of development and consolidating the economic gains of the previous two years, the government has, rightly so earmarked Rs.1.5 trillion for the PSDP this year, which is the biggest ever allocation for the purpose.Other visionary measures to enhance and upgrade the development activities catered to in the budget include; appropriations for Diamir-Bhash Dam, Green Line for Karachi, zero per cent duty on aviation industry and tax exemptions for industries in KPK, tax holidays for investments in solar energy and power transmission projects. With a view to overcome the energy crisis, an allocation of Rs.248 million has been made for energy projects and work on 7000 MW new projects is underway including production of 3600 MW from LNG. By the end of 2017 these projects would add 10,600 MW to the national grid.
Keeping in view the importance and role of communication infrastructure in the development of the country, a hefty allocation of Rs.185 billion has been made for construction of roads and bridges, marking 65% increase over the previous year. Similarly Rs.120 billion and Rs.
78 billion have been earmarked for Lahore-Karachi Motorway and Railways. Pakistan is an agricultural country, with agriculture playing a pivotal role in the economic development of the country. Even during the previous year, the economic growth was led by this sector.
The present budget does take adequate care of this sector and reflects the commitment and vision of the government in relying on the unchangeable realities, at least in the near future.
A number of measures have been announced in the budget for giving a boost to the agriculture sector, where the government has remained persistent with the credit guarantee scheme. In addition to this the government contemplates to extend interest-free loans to the farmers for the installation of tube wells run on solar energy. A three year tax holiday has been announced for investors who opt to set up cold chain and warehouse facilities.
On its part the government, has also enhanced the allocation for agriculture from Rs.
500 billion to Rs.600 billion.These measures have been appreciated by the farmer’s community, where reportedly a delegation of the Pakistan Kisan Ittehad which called on the Finance Minister on 23rd June, appreciated the package of incentives and loan facilities for farmers, saying that these steps would encourage the farmers community to contribute to the economy with a new zeal and vigor. The major focus of the government is also on the energy crisis, where curbing the industrial growth in the previous years has also caused hardships for the masses throughout the country. With a view to supplement its own efforts in regards to setting up of new energy producing units, under China-Pakistan Corridor, it has made a conscious effort to attract private investments in the energy sector by offering lucrative incentives, especially in electricity transmission lines. Our electricity transmission line system has become obsolete and according to the Minister for Water and Power, cannot take the load of additional power load. It is also responsible enormous line losses which is another major contributory factor in the energy conundrum. The government has also done well by introducing 10 year tax holiday for investors in the power transmission line projects. As it is evident, the budget for 2015-16 gives due importance to all the required ingredients of a progressive and welfare oriented initiative.

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