Budget likely to be delayed

KARACHI, May 12: The timely presentation of federal and provincial budgets is now in serious doubts after a formal announcement by the Pakistan Muslim League (N) to quit the coalition government.

Finance Minister Ishaq Dar of the PML-N is tendering his resignation with his other party colleagues on Tuesday to the prime minister.

June is the month when budgets are announced. It begins with the presentation of the federal budget, normally in the first or second week, followed in quick succession by the four provincial budgets.

But before the federal and provincial finance ministers present their respective budgets, there is a pre-budget drill.

The annual development plans for federal and provincial governments are discussed and debated in the Annual Plan Coordination Committee, and are finally approved by the National Economic Council.

Just a day before the federal budget, the federal finance ministry releases economic survey of the outgoing year.

But much before all these budget and pre-budget exercises begin, the stocktaking of available resources (domestic and foreign) is done, which are lined up, and there is a hectic consultation with all stakeholders to discuss the strategy of the next fiscal year’s budget.

It is not only the presentation of the budget in June, but there are two other events in July which are of vital economic importance: trade policy for the current year and half-yearly monetary policy which is supposed to be in close coordination with the fiscal policy which is spelt out in the budget.

In fact, the monetary policy is a credit plan for implementation of development programme, and it stipulates monetary expansion, credit allocation for various sectors and most important projects inflationary expansion that is to be in line with overall national growth in the economy.

Soon after taking over as finance minister, Mr Dar found many discrepancies and distortions in 2007-08 which in terms of hard cash had an impact of more than Rs500 billion.

He found budget deficit close to nine per cent, which he promised to bring down to six per cent by June when he presents the next year’s budget.

As part of an effort to narrow down 2007-08 budget, a senior officer in the finance ministry is reported to have invited a few top bankers to give an informal ‘advice’.

According to a senior banker, the officer, who is now no more in the finance ministry, asked the bankers to pick up deficit of about half a dozen public sector enterprises.

“The amount was roughly Rs100 billion deficit,” the banker recalled and said the officer wanted them to extend this facility without any ‘formal’ government guarantee.

“It is a typical financial engineering done by intelligent accountants the world over to window dress the balance-sheets of losing concerns,” he said.

The only bad part of the ploy was transferring deficits of government-run concerns to monetary system of the country.

Ishaq Dar is reported to have lined up $3.3 billion resources in Madrid, on the basis of which State Bank of Pakistan Governor Dr Shamshad Akhtar recently took measures to check falling exchange parity value of the rupee with the dollar.

“In 2008-09, we are behind schedule of all these calendar dates,” said a senior and seasoned banker now engaged in teaching.

He wondered how the budget-makers would go ahead with their task when for the first time the budget deficit is almost equal to total revenue collection.

The government recently brought down revenue projection for 2007-08 to Rs990 billion from Rs1,025 billion announced in the budget. But there is doubt the revenue would be even Rs900 billion by the end of next month.

The budget deficit is also more or less equal to this amount.

“Expectations are high, but resources are limited and in fact, diminishing,” warned a banker-turned-businessman who wondered as to why politicians are not able to settle quickly the constitutional and legal issues so that enough attention is given to ‘real, hard economic problems.”

“Pakistan is likely to face the consequences of rising international prices scenario, the impact of previous follies and growing expectation from the population to test capabilities of the new government,” Sheikh Amjad Rasheed, a global food businessman and chairman of Federation of Pakistan Chambers of Commerce and Industry’s Standing Committee on Banking Credit and Finance, wrote in a detailed presentation to the prime minister.

Amjad Rasheed proposed setting up of a task force, to be headed by the prime minister, on essential commodities.

It can have four sub-committees for assessment of domestic resources, monitoring and coordination with provincial governments, periodical forecast for each commodity, an year-wise plan for the next five years.

He proposed establishment of a food surety fund to support a minimum food inventory.

He wants the government to seek commodity grants and financial assistance from international agencies.

Assistance should also be sought from the well-to-do to help the disadvantaged and poor sections of population.

Proposals and suggestions are said to have been given by trade bodies and other individual businessmen, but the government as represented by politicians and bureaucrats has not sit across with business leaders to discuss and work out a strategy for the next budget.

A private TV channel quoted PPP leader Asif Zardari as having said to keep the ministry slots vacant after the PML-N leaders quit the federal cabinet. But there are speculations that either Mr Naveed Qamar who is serving as the minister of privatisation or Shah Mahmood Qureshi who holds the charge of planning and development with foreign affairs may be asked to look after the finance ministry for some time.

Businessmen and bankers say that the job to take such hard decisions would have been relatively easy for a coalition government, particularly when it would have come from a PML-N minister who represents the mercantile community of central Punjab.

The PPP is considered to be a representative of rural gentry that is shy to tax big agriculturists.

Any proposal that would bring in tax net stock exchange brokers, real estate dealers and captains of services sector while ignoring rich and mighty landlords, will not only be opposed but resisted in the cities.

“It will not be an easy sailing for the PPP though it may be having a majority support in the National Assembly,” a business leader said.

The only ray of hope is that the PPP leaders announce to continue their dialogue with PML-N.

The PML-N promises to continue to support the government “on issue to issue basis” and it will not sit in the opposition at least till May 20.