Pakistan: Budget’s aftermath

DAILY TIMES

In his post-budget press conference a day after the presentation of the Budget 2013-14, Finance Minister Ishaq Dar asserted that no tax on essential food items has been imposed, and only the rich had been taxed. Even if it is conceded that Mr Dar may be technically right, this is only half the truth. The price rises that have followed on the heels of the budget tell the other half of the story. The one percent increase in sales tax (GST) announced by the worthy finance minister in his budget speech was implemented just one day after that presentation. Objections have been raised that this step does not have legal cover since the Finance Bill has yet to be passed by parliament. After its passage, the increased tax should only kick in on July 1, the start of the new financial year. The PPP amongst others has objected to this ‘haste’. The measure has also been challenged in the Supreme Court. The fact of the matter is that this kind of increase in GST has been implemented in just this manner over many years, irrespective of the Finance Bill’s passage into law. Practiced it may have been for long years, but this is perhaps the first time that a political and legal challenge has been mounted against such premature imposition of an enhanced GST. In response to the increase in GST, POL products and CNG prices have been immediately raised. Sympathetic price rises in edibles and daily use items have followed as surely as night follows day. Inter-city fares too have been jacked up. All this ‘negates’ Mr Dar’s argument that no tax on essential food and other daily use items has been imposed. The free market economy that everyone from the finance minister downwards now accepts as a given, has worked its ‘magic’. The market is not amenable to the fine tuned arguments of finance ministers or economists. Any across the board increase in an indirect tax such as GST is bound to give rise to sympathetic price rises in essentials and even non-essential items. Being indirect, GST inevitably is regressive, hitting the poor harder than the well off as a proportion of their income. Since the budget failed for the first time in living memory to raise the salaries of government employees (the increase of 10 percent in pensions and raising the minimum pension to Rs 5,000 from Rs 3,000 notwithstanding), it has sparked off unrest amongst the denied. Government clerks have announced a strike on Friday, other government servants from June 21. Mr Dar’s argument that government employees’ salaries were raised by 20 percent just two months ago was refuted in his press conference by the fact being pointed out by media men that that increase was confined to a relatively small section of government employees and was not extended to all categories of government servants. Mr Dar has asked government employees in his press conference to swallow the bitter pill this year in the hope of relief next year. The alternative, he argued, was to print more money, which would inevitably be even more inflationary. It seems that the government servants were not impressed by the finance minister’s case, pointing out that concessions in import of hybrid cars for the relatively well off when the poor were finding it hard to make ends meet was unacceptable. The new government may have miscalculated the political mood at the mass level. The heightened public expectations from the incoming government tended in certain cases to soar beyond the possible. For example, the impatience with load shedding resulted in riots in Faisalabad, and the situation was made worse by the tender attentions of the police towards the protestors. Similarly, having been tormented by inflation, unemployment and other afflictions through the five-year rule of the PPP-led government, the people are impatient for change, relief, succour. Admittedly Mr Dar’s hands were not totally free to satisfy the public’s expectations. But particular measures in the budget such as the example of hybrid cars pointed out above left the government inadvertently looking uncaring and insensitive to the plight of the masses. Such a perception so early in the new government’s tenure cannot be good for it. It is therefore just as well that Mr Dar has decided to set up a committee to review the question of salary increases of government employees. In today’s Pakistan, this is a measure of how all governments from hereon will have to be aware of, and responsive to, the demands of the people.