Saturday, June 2, 2012

Pakistan's Rs 2.96 trn Budget: Most targets not met

Although the government was able to sustain growth in most of the sectors and also contained inflation at 10. 8 per cent bringing it down from 13.8 per cent last year, most economic targets it set for 2011-12, were not met. The most fundamental reason for the failure is unabated power shortage that is said to have cost the country about Rs580 billion in real economic term during the 11 months of the outgoing fiscal, nearly two per cent of the GDP that is a colossal loss for the country which has already hardly posted a growth rate of merely 3.7 per cent against an estimate of 4.7 per cent. Unveiling the Economic Survey of Pakistan 2011-12 at a news conference on Thursday, Finance Minister Dr Abdul Hafeez Sheikh did not agree that this fiscal had a bad spin. He offered excuses, mostly oft-repeated that the national and international factors, some of them unpredictable, were responsible for the malaise. He said higher international oil and commodity prices, poor security situation and natural disaster within like as flood (in 2010), the global economic crisis and investors' negative perception of Pakistan, had badly impacted the country's economy. He dwelt on measures to bring down government borrowings and increased tax revenue collection that brought down inflation adding that this year was "historic" in tax collection as it came up to Rs1449 billion revenue in the first ten months of current fiscal compared to Rs1250 billion of last year, a raise by 25 per cent. The minister once again said the tax collection regime required reforms, but he failed to explain who prevented his ministry from reforming the tax collection machinery. By only saying that tax collection needed to be improved to provided basic amenities of life to our people and decrease our reliance upon the world, the government has exposed itself for mere lip service to the people. He said 57.50 per cent of tax collected is being distributed among provinces under NFC award. Besides, the mandatory share of AJK, Gilgit-Baltistan and tribal areas is also given to them leaving only 30 per cent with the federal government. The survey shows only a few sectors such as inflation and agriculture seemed to be on target. As for the energy crisis, Dr Sheikh said it worries the government most. He admitted hike in electricity tariffs from time to time generated huge revenues to mitigate critical circumstances; he also accepted that the government had failed in the sector despite providing over Rs1.2 trillion in subsidies in more than four years. However, he said 'the real issue IS not that of energy shortage but affordability and the readiness of the consumers to pay the real price of energy. Agreeing that the energy crisis was primarily a governance issue, he spoke of the role of provinces in power production and consumers who were involved in theft and leakages and Rs300 billion worth of unpaid electricity bills. The survey shows agriculture, manufacturing and construction sectors doing better than the previous year even if almost all other targets were missed. The agriculture sector posted a growth of 3.1 per cent against a target of 3.4 per cent though this was still an improvement over the 2.4 per cent growth of the year before. The manufacturing sector grew by 3.6 per cent, nearly reaching the target of 3.7 per cent. Large-scale manufacturing grew by 1.1 per cent, which is an improvement over the one per cent growth last year though it fell short of 2 per cent annual target. The construction sector improved by 6.5 per cent against a negative growth of 7.1 per cent witnessed last year. On the other hand, the services sector grew by 4 per cent. It not only missed the target of 5 per cent, the sector had also done better in the last fiscal year when it grew by 4.1 per cent. Real investment also saw a decline from 13.1 per cent of GDP last year to 12.5 per cent this year though it fell short of the target of 13.8 per cent. National savings also drastically declined to 10.7 per cent of GDP, which was lower than the target of 13.2 per cent and the 13.8 per cent recorded in the previous fiscal year. Foreign direct investments also fell down drastically and this shows foreign investor's no-confidence in Pakistan's economy and law and order conditions as Mr Shaikh said this was because of the poor perception of Pakistan internationally. The survey, however, did not lay due emphasis on power crisis that is accounting for low performance of all sectors, particularly industrial and agricultural output. The minister also failed in this regard. The crisis is really a matter of life and death for the country; without overpowering the giant issue, no progress in any economic sector is possible.