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How best to deal with the floods

However, the two multilaterals have stated that this would be a preliminary report and not the final version. Whatever the DNA's conclusions maybe in terms of the actual loss suffered, the fact remains that reliance on bilateral and multilateral support to meet the bulk of our financing needs is simply not tenable.

This was reiterated by the bilaterals as well as multilaterals in the special United Nations sessions, chaired jointly by Secretary General Ban Ki-moon and the Pakistan Foreign Minister Shah Mehmood Qureshi during which Pakistan was urged to be realistic and raise more of its own money to rebuild the country as well as to ensure transparency and accountability of assistance.

The DNA would determine the resources required to meet the challenging task of reconstruction and rehabilitation which, in turn, everyone is agreed would require a revisit of the June 5, 2010 budgetary expenditure allocations as well as taxation measures.

Be that as it may, it is evident that the Ministry of Finance has already begun to reprioritise expenditure allocations, an example being the strike action yesterday by the Vice Chancellors of 72 universities in protest against the proposed cut in their allocations, as well as issuing notifications to all ministries/divisions to provide a list of all non-salary related expenditures that would be slashed.

In addition, reports indicate that the Planning Commission is engaged in an exercise to postpone/delay several development projects in an effort to divert funds more urgently required to rehabilitate the flood-affected, as well as to reconstruct the infrastructure facilities destroyed due to the floods.

At the same time, reports indicate that the Federal Board of Revenue (FBR) has already submitted various tax proposals and their proposed rates based on the revenue that would be required to effectively undertake rehabilitation and reconstruction work based on the DNA.

Two extremely disturbing elements of this exercise undertaken by the federal government need to be highlighted. First and foremost, the exercise to increase revenue and decrease expenditure appears to be limited to the federal government. Such an approach is inexplicable given the fact that the National Finance Commission award reflected a painstakingly reached consensus agreement that strengthened provincial financial autonomy at the cost of the federal government.

Financial autonomy must go hand in hand with greater responsibility as well, and one would hope that a similar exercise to revisit the provincial budgets is being undertaken. The fact that there appears no evidence of such a revisit has raised the rather disturbing element of the possibility that the President issue a proclamation of financial emergency under Article 235 of the Constitution.

This would effectively take away all the financial powers of the provinces and allow the centre to impose taxes, however unpalatable they maybe to the provincial governments, as well as determine their expenditure priorities. Few would support this measure as the obvious fallout may well sound the death knell of the existing political system.

In addition, considering that under Article 234(3), a proclamation declaring financial emergency 'shall be laid before a joint sitting of parliament and shall cease to be in force at the expiration of two months', unless extended further in a joint sitting, is of a limited duration, therefore it would be preferable for provinces to play their due role in reformatting their budgets in line with the needs of the damage caused by floods in their province, rather than to be compelled to do so through a proclamation under the Constitution.

Secondly, the entire cabinet must be on the same page with respect to its post-flood economic strategy as well as priorities. What ministries/divisions' budgetary allocations would be reduced must not be done pell-mell, but according to a defined strategy.

Many argue that the current post-flood economic scenario may provide an excellent opportunity to the federal government to begin slashing its 100 plus ministers and advisors, a requirement under the 18th Constitutional Amendment in any case.

While to date the focus of politicians on rescue and relief operations is fully justified, yet a revisit to expenditure allocations and revenue generating proposals, as contained in the federal and provincial budgets, based on strategic thinking, is urgently required.
Copyright Business Recorder, 2010


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