Conversation with Mr Majyd Aziz — Former President, Karachi Chamber of Commerce and Industry
PAKISTAN & GULF ECONOMIST had an exclusive conversation with Mr Majyd Aziz regarding FEDERAL BUDGET 2022-23. Excerpts of the conversation are as follows:
Sitting in front of the TV, watching and listening to a Finance Minister presenting the Federal Budget is an annual ritual that trade and industry performs, usually without fail. In the days of Ghulam Ishaq Khan, the radio was the main medium. GIK would present the entire budget in his monotonous voice and, by the time the speech would end, the business community would know exactly what affected, impacted, and benefitted their enterprises. Gradually, the Finance Ministers started highlighting the prominent points of the Budget and then over the next few days, the clouds would clear. Since last few years, the Opposition in the National Assembly would disturb the speech by heckling, booing, and throwing the Budget documents in front of the Speaker. These antics disturbed the concentration of the listeners and vitiated the situation. This year, with a tame Opposition consisting of renegade PTI MNAs, as well as the civilized GDA MNAs, the Finance Minister had a smooth sailing that also resulted in Members using their cellphones or taking a much-needed snooze.
The Finance Minister was walking on a tightrope over Niagara Falls with no evidence of a safety net below him. The IMF has to be appeased, the economy needs to be sustainable, the low and medium income denizens have to be assured and placated, the state capture elite have to be unabashedly supported, and the political ramifications have to be endured. In this implacable situation, it is no pudding and pie for any Finance Minister. Dr Miftah Ismail, a scion of a well-entrenched industrial family, earned plaudits with his deft handling of the past, present, and future happenings. However, with some cynicism, there are some concerns of the citizens.
Is the Budget (in the congratulatory words of Premier Shehbaz Sharif) “balanced, progressive, and pro-people budget” or is there some ominous camouflaging? Is this a stop-gap endeavor or there would be new landmines laid in the coming future? Would there be more mini-budgets on the way with steep increases in electricity, gas, and fuel rates, depreciation of the Rupee, and more tweaking of the Custom duties and other governmental levies? Would the Federal government give a wink and a nod to State Bank of Pakistan to keep on increasing the discount rate, to the Federal Board of Revenue to adopt draconian measures that, in reality, would burden those already in the tax net, and to the Provincial Minimum Wage Boards to further increase the Minimum Wage from PKR 25,000 to, say, PKR 35,000 by end of August or September? Only time and events would reveal whether the goalposts would change. The fact is that the Federal Budget is in a continuing mode since the last two months and would keep on continuing till next June or election time, whichever comes first.
The Finance Minister must be given commendation for his efforts, especially when external as well as domestic fireworks are impacting daily. To some extent, the Budget could be termed as the “Ukraine” Budget because what is happening in the Putin-Zelenskyy showdown is globally disastrous and more so for developing nations. Moreover, the IMF, FATF, Friends of Pakistan Group, Moody’s ratings, fast depleting Foreign Exchange Reserves, political instability and deep polarization, electricity, gas, fuel deficiency, and continuous Rupee depreciation are all strong, menacing and foreshadowing factors that may keep the usually jovial and easy going Minister sleepless in Islamabad.
The Conventional Wisdom within the private sector is, in the Preamble in Budget speech, despite his political blustering statements, especially enthusiastically reading the bureaucratically written diatribe and tirade against the outgoing government, he focused on improving the economy and creating confidence of the drivers of the economic engine. There is an air of optimism floating around him, that global oil prices would decrease, that IMF would decide positively, that other Development Financing Institutions and friendly countries would provide essential financial support, that the macroeconomic indicators would grow, and that the present government would complete its term of office.
The contents of the Federal Budget that are noteworthy and appreciated include roping in the small retailers by imposing a fixed tax between PKR 3000 and PKR 10,000 as the first step towards making them tax filers and initiating the process of documentation. The bold decision of enhancing the tax rate of banks, although still less, is a pragmatic decision because banks earn more from lending to government and it is high time there is a payback from the billions they earn. The decision to enhance the allocation of funds for social safety nets, albeit less keeping in view the inflation, is appreciated. The target subsidy of PKR 699 billion must be increased maybe through diverting allocations from PSDP or through arrangements with private sector charitable and welfare organizations. It should be understood that post-COVID, the normal is the new never-normal scenario, and not only the poor and downtrodden, but even the middle-class, have been tremendously affected in many ways.
Furthermore, the positive recommendations such as higher tax rates for the rich, efforts to increase agriculture productivity, promoting export-based industries and service sector, banning imports of automobiles and furniture, trying to stem tax leakages that are over PKR three trillion, encouraging cultivation of Canola (hopefully also Soybean), facilitating students through scholarships, laptops, soft loans, and Green Youth Movement, immediate refunding DLTL and Sales Tax claims of exporters, structuring a new Industrial Policy, and promotion of sports, arts and entertainment sectors. Another good initiative is to establish nine new Special Economic Zones to add to the nine SEZ under CPEC. Alas, even the already designated SEZ under CPEC are not functioning yet. Just for the sake of information, Bangladesh, that is smaller in land size than Pakistan, has many functional SEZ and the government is establishing 100 more SEZ. Visionary thinking of the Prime Minister of Bangladesh.
Of course, the Finance Minister could have announced innovative programs and facilities to promote SMEs, and he could have increased the allocation for IT sector to PKR 50 billion instead of a meager PKR 17 billion, and he could have announced allocation to explore gas reserves that experts say are in about 75 million hectares of land, and he could have announced more ease of doing business measures that would attract Foreign Direct Investment as well as from Domestic Investors. What is imperative is a policy of fast track decision making, a will to embrace change, and the mindset to collaborate with all stakeholders.
In the words of Gloria Macapagal Arroyo, Former President of the Philippines, “We have to be bold in our national ambitions. First, we must win the fight against poverty within the next decade. Second, we must improve moral standards in government and society to provide a strong foundation for good governance. Third, we must change the character of our politics to promote fertile ground for reforms.”