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KARACHI: There is a need to make the budget 2024-25 people-friendly, said economic expert and Pasban Democratic Party (PDP) leader Irfan Sayed.

He said every year, as the budget unfolds, Pakistan’s financial wizards get to whet their appetites for qualitative and quantitative contemplation. And each year, on a recurring basis, this exercise ends up in apologetic postures than in promising secured futuristic scenarios.

He said budget is an estimation of expenditures and income for a defined period of time, typically a year. However, when this exercise is undertaken on a national level, it must account for a host of both internal and external factors, including the existing economic conditions, political situation, security-related issues and infrastructure requirements.

While there are several stages in finalizing the budget statement, the important thing is its rationalization and sustainability. If the budget of a country does nothing to proactively secure potential future scenarios and accordingly appropriate the revenues and expenses, then it is merely a damage control tool rather than a pivotal mechanism for economic control and management.

He said presently the country is absolutely ravaged by extremities of price hikes, dwindling investments, and unemployment — all made worse by the lack of any credibility in politics and governance.

Under the IMF’s dictates, the government’s entire thrust is on generating maximum revenues by taxing people, one way or the other.

The electricity tariff continues to rise in significant chunks. While utility tariffs need to be rationalized to compensate for line losses and pilferages, punitive measures must account for all acts of distribution inefficiencies.

He said over a period of four years, the petrol price has increased from Rs 100 to a maximum of Rs 287, and currently it rests at Rs 267.

These two energy carriers are major cost inputs for all economic activities. Any advantages that were to accrue from devaluing the rupee, particularly in making our exports competitive, have been sharply offset by the rising, uncontrollable cost of production.

He said taxation essentially reduces fiscal deficit by increasing tax revenues, leading to increased national savings. But the process has to be rationalized and regulated.

Over the years, an elite class has emerged through investments in real estate and selling of services. Traditionally, tax recovery through these businesses has been very low leading to high residual incomes.

This residual income drives increased consumption and thus leads to higher imports at the expense of an eroded tax base. Reversing this trend will automatically lead to lower the current account deficits.

He said at the same time, taxing real estate, retail, and agriculture will render these businesses less lucrative. This will incentivize investments in other sectors like manufacturing, because of parity in the tax and tariff structure.

He said higher interest rates make it more expensive for people to borrow money and encourage people to save. Overall, that means people will tend to spend less.

If people spend less on goods and services overall, the prices of those things tend to rise more slowly. So inflation tends to stay in control. However, this is more relevant to an expanding economy where consumption is increasing and it becomes difficult to synchronize it with supply.

He said in fact, the inflation in Pakistan being witnessed is due to supply-side disruptions and has nothing to do with the interest rate.

Maintaining such high interest rates would adversely impact the SMEs’ cost of doing business, access to capital, and access to foreign exchange which would make it hard for them to remain profitable. Consequently, there have been large scale bankruptcies, non-fulfillment of export orders, massive loss of employment opportunities and dent to tax revenue.

He said right now in Pakistan, we have the classic example of ‘stagflation which is the combination of high consumer price inflation and stagnant economic growth, usually accompanied by rising unemployment.

Copyright Business Recorder, 2024


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KU May 29, 2024 01:51pm
People, especially farmers do not trust the govt anymore. Wheat scandal and plunder has devastated millions of farmers, while inaction on this heist is an easy walk over of criminals over justice.
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