Budget illiteracy – by Aakar Patel

Related Articles: Budget coverage misses the mark: What on earth is ‘relief’? – By Farooq Tirmizi

In a very good roundup of how budgets are reported in Pakistan, Aakar Patel has rounded up how people who do not understand economics, taxes, savings and overall finances are ready to pounce on giving fatwas on budget speech and the overall budget. It is also interesting to see the variety of comments between serious and non serious writers. Millat, a Gujarati language daily from Karachi, which is very popular with traders belonging to memon and other Gujarati speaking communities has simply stated “the economy was a victim of the security situation”. Pakistan’s problem remains that we believe in populist chants without realizing the impact on our economy. Get security and law and order fixed and all will get better. I would like to thank Aakar Patel for his most appropriate analysis. Another analysis by Farooq Tirmizi in the Express Tribune may also be read to get a feel of how we twist important issues like budget and economy.


Budget illiteracy – by Aakar Patel

Source: The Friday Times, June 10-16, 2011 – Vol. XXIII, No. 17


The budget is a good time for nations to look at their economy. It is easier to isolate problems when data is on hand. The budget is also the only time of the year in our part of the world when newspapers cover the economy objectively. This makes it possible to collectively think of solutions.

Pakistan’s problem is that its economic growth is weak. Foreign investment has stopped because of violence. Internal investment has also slowed down for that reason and because of a culturally poor savings rate. Pakistan’s credit rating is second worst in the world according to Moody’s (and according to S&P it is the worst). How did the Urdu newspapers debate the economy and the budget? Let’s have a look.

Dr Hussain Ahmed Paracha (Nawa-i-Waqt, June 3) spoke of the economy in Islam’s golden age. When Hazrat Abu Bakr (RA) was named the first caliph, he was asked to manage Madina’s finances. He said he couldn’t spare the time, for he had no means of livelihood other than his business. He was told by the Sahaba to withdraw a salary from the coffers, at which he said he would take as much as an average labourer (“ek aam mazdoor”) was paid.

When told he wouldn’t be able to manage with that sum, the caliph said that he would also raise the salaries of Madina’s labourers to liveable standards.

Such care for citizens was missing from Pakistan’s leadership, Dr Paracha felt. The party that had come to power four times on the “roti, kapda aur makaan” promise would yet again deprive Pakistanis of these through the budget (“budget ke naam par mahroom kare gi”).

He ended by snapping at Pakistanis for voting for the PPP (“awam ko apni pyari awami hakumat mubarak ho”).

Nawa-i-Waqt said in its famous column Sarerahe that the government had no means to control plunder from within (“lootmaar rokne ka koi bandobast nahin”). There was no mechanism for economic progress either, it said, and the budget was merely the means through which the government survived another year.

The paper noted with admiration Pakistan Muslim League-Quaid leader Marvi Memon’s tearing of a copy of the budget document and throwing it in the prime minister’s face (“budget ke purzay kar ke wazir-e-azam ke munh par dey marey”). Sarerahe reproduced the couplet Finance Minister Hafeez Shaikh recited in closing:

Tundi-e-baad-e-mukhalif say na ghabra ai uqaab / Yeh to chalti hai tujhe ooncha udane kay liye (“Fear not the resistance of the fierce wind / for it exists to make you soar higher”). Sarerahe was unimpressed, saying it remained to be seen from what height Shaikh would plummet, and whom he would fall on.

Attaul Haq Qasmi (Jang, June 6) said he didn’t understand much about the budget, but he greatly enjoyed its spectacle. In particular he was entertained by the aggressive posture of the opposition in the assembly.

Hafeez Shaikh was an “angrezi ke aadmi” and would have remembered an English saying: ‘If you can’t avoid an attack on your honor, enjoy it’ (“agar aap ki izzat pe hamla na-guzir ho chuka ho to aap relax ho jayein aur usey enjoy karein”). After a few moments of being shocked, Shaikh had started enjoying it.

On Dawn News, anchor Talat Hussain gathered three economists to discuss the future. India had transformed itself economically (“kaya palat di”) in the last 20 years, he said. Why was Pakistan unable to do this?

Former finance minister Shaukat Tareen said nine percent growth had to be maintained by Pakistan for 20 years or longer to achieve stability. He identified two problems, both linked to people. First, Pakistanis acted on self-interest, rather than national interest. Traders resisted the Reformed General Sales Tax pointing out that farmers weren’t taxed, and the state suffered. Second, there was a lack of competent people to run the six key ministries of finance, industries, commerce, planning, agriculture and privatisation.

Talat Hussain pounced on this and asked if this was the silver bullet: “Kya yeh chhe bandon ka sawaal hai?” But it wasn’t and the discussion moved on.

Former trade and commerce minister Humayun Akhtar Khan said the government’s problem was resources. Pakistan earned Rs2.2 trillion but spent Rs3.2 trillion. This missing trillion was why Pakistan was forced to beg around the world every year. How would this be narrowed? Khan focused on losses made in the public sector, in particular by PEPCO, and on tax collection in construction and agriculture. The national savings rate was low and clearly foreign investment was needed for sustained growth. How would Pakistan secure it?

Here Khan left the problem and said it was a broader question of successive governments and their intention (niyyat), vision and capacity. All three were lacking in Pakistan. He thought credit availability and access to power and gas would make a big difference to growth.

Finance Ministry advisor Saqib Shirani thought the problem was political. Pakistan had no national leader, but only elevated local ones. He felt that if tax theft (three percent of GDP) and power theft (another two percent) could be controlled, things would become manageable.

The discussion was unfulfilling because the specific problems the experts identified (resistance to reformed sales tax, public sector losses, absence of agriculture tax, shortage and theft of energy, theft of taxes and high levels of corruption) were each present and unsolved in India too.

Pakistan’s problem clearly lay elsewhere but it went unidentified. Karachi’s Millat Gujarati opened its analysis on the budget with the pronouncement that the economy was a victim of the security situation (“security stithi karane arthkaran daban-nu shikar chhe”). The paper’s analysis was informed and dispassionate.

Opposition leaders had called the budget figures unreal (“avastavik aankdani hera-pheri”), but other circles saw it as balanced (“samtol”) given the reality of Pakistan’s straitened circumstances.

The complaint of traders (Millat’s primary readership) and industrialists was that some of their suggestions hadn’t been incorporated, though the reduction in the rate of GST was welcome.

They felt that ending regulatory duty and special excise duty on 392 items would lower their prices. Millat noted that the “friendly opposition” of Nawaz league had ended.

Getting the budget passed was a real challenge (“kharekhar ek padkar”) for the government because the MQM had separated on the question of the RGST.

But it had also succeeded in both keeping on track the July talks with the IMF and securing release of the remaining instalments of the stand-by agreement loan.

Shaukat Tareen and other economists didn’t believe the budget’s numbers were achievable. The paper also felt the revenue target of Rs1,952 billion was impossible (“ashakya”) to meet. Fiscal deficit wouldn’t stay at four percent either.

New currency would have to be printed and so inflation would not be contained (“fugavo maryadit rehshe nahin”). The ending of several subsidies would make those things significantly costlier.

The PPP had failed to give a budget that would improve the economy, decrease unemployment and keep inflation in check. But it had succeeded in isolating the Nawaz League and would therefore survive for now, it said.

There was no mention of military spending in Pakistan’s non-English newspapers. Their debate began after that fourth of the budget was sliced off. Overall, Urdu newspapers showed little interest in data and what the economic future was to be if things continued in this manner.

Jang’s pithy poet Anwar Shaoor put it thus in two poems, ‘Bajat’ and ‘Hisaab’ on June 4 and 5:

Khubiyan aur khamiyan is ki / kya bhala tabsaron say jaanein gay? / Bajat acha hai ya bura, yeh baat / ham nayi qimton say jaanein gay.”

“Uff, yeh arbon aur kharbon ka hisaab / kya samajh mein aaye salana bajat? / Ghar chalaein kis tarah tankhwah mein / ham liye baithein hain mahana bajat.”