Pakistan: The Budget and the poor

Stung by criticism that the Budget 2014-15 is tilted in favour of the rich and offers only scraps and crumbs from the table for the poor, Finance Minister Ishaq Dar was at great pains to defend the Budget as not anti-poor during his post-Budget press conference in Islamabad on Wednesday. However, persistent questioning by media people on the concessions and relaxations to the business community and the impact, for example, of the withdrawal of subsidies on the electricity tariff put the minister on the mat. Dar admitted that over 50 percent more than 90 million people are below the poverty line of an income of $ 2 a day some estimates put this figure at 69 percent. He claimed his government was committed to raising this huge mass of people out of poverty. However, the consensus on the Budget is that it is business-friendly, with hardly any relief for the poor, the youth loan schemes, Benazir now National Income Support Programme and educational facilitation for deserving students notwithstanding. Laudable as these schemes are in themselves, they are a drop in the ocean of poverty that laps our shores.

Admittedly, the straitened finances of the state leave little if any room for meaningful interventions, innovations and creative measures to offer the people groaning from inflation, unemployment and insecurity anything meaningful except token sops. Dar threatened those intending to increase prices using the excuse of the budget with strict measures “iron fist” to control prices. It is strange to hear an advocate of the market economy as the panacea for all our woes speak in this language. How would this ‘iron fist’ control the market and its inherent dynamic was left to the imagination. The claim that the fiscal deficit, which panned out at 8.8 percent of GDP last year, would be incrementally reduced over some years to four percent was not fleshed out, while critics point out that the raise in salaries and pensions was likely to act in the opposite direction, with resort to borrowing to meet the gap the most likely course, having its own implications for inflation.

The measure to impose higher taxes on non-registered non-filers of tax returns is both a punitive step as well as an incentive to document the informal economy, a laudable objective that seeks to broaden the tax net, a badly needed policy to raise revenues and lighten the burden as far as possible on the honest tax payer being treated as the proverbial goose that lays the golden egg. Large scale retailers such as shopping malls and smaller retailers in the bazaar have been dealt with by imposing the condition of electronic sales registers for the former and a presumptive tax based on electricity consumption on the latter. Parliamentarians have been put on notice, quite rightly, that they would be deprived of all allowances if they fail to file tax returns by June 10.

The finance minister may have bent his back to defend the budget from charges of being pro-business and anti-poor, but the reactions of the respective communities says it all. The business community has been full of praise for what they call a growth oriented budget, while the working classes see nothing in it for themselves. That perhaps is why the clerks and teachers protesting against the budget were dealt with harshly in Islamabad on Wednesday (beaten black and blue according to accounts. The trade unions are up in arms, the agriculture sector feels it has been treated like a poor relative and the apprehension that without some relief to the masses the government may face more than its share of protest over the coming fiscal year cannot be dismissed lightly. The problem with the government’s approach is that it still adheres to the theory that the business class will pull the economy out of the doldrums and the discredited trickle down theory will do the necessary for the people at large. A perceived business-friendly government may have the luxury of indulging in such flights of fancy that recent history belies even in stronger economies than ours. But the government will have to burn some midnight oil to find ways and means to lighten the crushing burden of the masses or face increasing trouble on the streets ahead.