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Budget 2020-21: a critical view

The budget proposals for 2020-2021, prepared by the Adviser on Finance and Revenue, Dr. Hafeez Shaikh — against the backdrop of potentially the biggest public health emergency and economic downturn in generations — and presented on the floor of the House by Minister for Industries and Production Hammad Azhar, boldly announced, “There are no new taxes in this budget.” This could be termed as an activity of an ordinary salesman rather than that of a hardcore finance manager. He was sounding as if the Pakistan economy was flying on animal spirits: he presented a fiscal plan based on irrational calculations showing an increase in tax revenue by over 27 per cent to Rs4.963 trillion, without levying any additional tax – a job, only a magician who can make a pigeon appear from his hat can do.

Even a man with average intelligence would say that under such unprecedented situation, targeting a tax collection that is 27 per cent higher without any sound strategy is simply ludicrous. Dr. Hafiz Pasha, economist, author and former federal minister, commenting on the budget ,said, “Even if we assume that the economy will grow by 2 per cent and inflation remains 6.5 per cent, we can expect only 8.5 per cent increase in taxes. Are we expecting the FBR to deliver a miracle next year? The actual fiscal deficit will balloon to 10 per cent of GDP this year against the projection of 9.1 per cent.”

Needless to emphasize that nutritious food and comprehensive health are the two basic necessities of life. As such, allocations for health and food security should have been the top priority of our finance managers. Though the allocation to health has been doubled to Rs25 billion, it translates to barely Rs125 per head in a country where the health infrastructure is simply insignificant and, above all, is miserably hit by COVID-19. The pandemic emergency fund of Rs70 billion is also very small, keeping in view the unending disaster.

It goes without saying that nothing is more important for Pakistan right now than flattening the COVID-19 curve and, therefore, the most disappointing aspect of the budget is the allocation of just Rs25.5 billion for health at the federal level. Since we don’t know when the epidemic curve would flatten out, there is a dire need to ramp up health services expenditure now. During his speech, Azhar explained that the funds would be used to improve health services and digitise the framework – a pretty costly deal. Though health allocations for the next year have been doubled to Rs25.5 billion from last year’s Rs11 billion, keeping in view the worsening health situation, this is merely a drop in the ocean.

Dr. Mushtaq Khan, founder Doctorate Papers, rightly said, “A more fundamental concern is the rapid growth of COVID-19 infections. If the spread of the pandemic is not brought under control in the immediate future, the looming healthcare crisis could easily undermine the government’s economic goals for next year. If the pandemic continues to spread at an alarming rate, business will eventually stop operating. This will undermine the economy’s ability to sustain livelihoods. The policy priority should be to contain the pandemic, and then revive the economy.”

 

Keeping in view the massive destruction to ready harvest crops due to locusts swarming in several provinces, there is a dire need to set aside a reasonable amount to curb the menace. The uncontrollable menace is creating a serious problem for food security, the other most important necessity for human beings. Thus Dr Iqrar A Khan, former vice-chancellor of Agriculture University, Faisalabad, rightly commented, ” With the pandemic hitting incomes of the majority of the people and pushing them below the poverty line, people are expected to reduce their spending to essentials only: what is more essential than food? Food production for agrarian economies like Pakistan not only ensures domestic peace but opens up the world market as well. But, the government seems to have missed the point! Under the circumstances, there should have been a Marshall Plan for the agri-sector. But the two allocations (Rs10 billion for locust battle and Rs12 billion for food security), are essentially from last year’s commitments. There is no fresh initiative for the sector, nor any investment plan. How the government plans to get 4 per cent growth without any plan or investment, only official planners can explain.”

After health and food, the most important sector is of course education. It may be mentioned here that HEC had demanded an allocation of Rs104.789 billion as recurring grant for fiscal year 2020-2021 but the Government promised an allocation of Rs70 billion and finally allocated Rs64.1 billion. This has come as a surprise for the Commission and according to sources, it has now decided to take up the same with the government seriously. It may be added here that the government had allocated Rs64.1 billion for HEC as recurring budget for the 2019-2020 fiscal year which means there is no increase in the recurring grant for the HEC for the new fiscal year.

Meanwhile, the Federation of All Pakistan Universities Academic Staff Associations (FAPUASA) has expressed serious concerns over the HEC budget cut. FAPUASA Punjab chapter president Prof. Dr. Mumtaz Anwar Ch. demanded the government allocate a budget to the HEC as per its demand to save universities from further crisis. It is also pertinent to mention that the federal HEC has already decided in principle that due to paucity of funds, no new university was being added to the recurring grant stream of the HEC during fiscal year 2020-2021.

The general public is concerned about health, food and education of their children. Unfortunately there is nothing but disappointment for them. In fact, they are not pushed about the austerity measures resulting in a drastic cut in the expenses for the Prime Minister’s House, President’s House, etc. All the good points in the budget, in fact, are meaningless for the common man and this cannot be called a common man’s budget.

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