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SLASHING A BUDGET

Dr Abid Qaiyum Suleri highlights sectors which deserve attention in the coming budget The federal budget used to be an extremely relevant document for the people. Any change in tariffs, oil prices, sugar prices, etc., were part of the budget and merited a lengthy debate in parliament. Thanks to the imported economic wisdom, most of such issues are now beyond the ambit of the budget.

Regulatory authorities such as National Electricity Power Regulation Authority (Nepra) and the Oil and Gas Regulatory Authority (OGRA) can take care of power and oil prices increase on a regular basis. Thus, there is a mini-budget almost every month.

The federal budget (an estimated inflow-outflow statement) is a reflection of national priorities. If, as a nation, we are concerned about energy crisis, loss of livelihoods, inflation, poverty and other social issues, then these issues should get more attention (read allocation) in the forthcoming budget. I am talking about the Public Sector Development Programme (PSDP) that is being reduced every year for managing debt repayment and defence expenditure.

In the forthcoming budget, there must be significant allocation for development to ensure human security which, in turn, is the basis for achieving national, regional and global securities. The PSDP should also be financed through internal resource mobilisation and should not be linked with (not to be materialised, hard to be materialised) foreign assistance.

In order for internal resource mobilisation to occur, tax base needs to be expanded and the tax to the GDP ratio needs to be improved. Documentation of the economy is a must for tax base expansion. Systems of regressive taxes need to be abolished with a significant reduction in indirect taxes which should be replaced by direct taxes such as wealth tax, tax on agricultural income, urban real estate and the service sector.

Additional resources provided to provinces under the NFC award would not be sufficient to smoothly and effectively deal with the subjects which were being managed by the federal government before the implementation of the 18th Amendment.

This would require renegotiation of the National Finance Commission (NFC) Award in the medium run. However, special allocations should be made in the forthcoming federal budget for provincial governments to take care of (to be) devolved services, especially health, education, agriculture, population welfare and environment.

These allocations should be on top of the NFC Award and the provincial PSDP payments.

Energy sector is another crucial priority that merits attention of our policy makers. It is a non-traditional security threat affecting not only people’s livelihoods and day-to-day life but economic growth and potential tax base as well.

The SDPI reports on performance of alternative energy generation and that of electricity governance highlight that energy generation and distribution sectors are not only ignored during federal budgeting, but whatever meagre allocations are made for these sectors cannot be utilised properly.

One not only needs to increase the allocations for alternative and renewable energy resources but also for enhancing the capacity of those who would be entrusted to work on alternative energy projects.

Allocation for mass transit system (underground transport system, trams, urban railways, etc.) especially in big cities would not only provide relief to the public but also help in saving petrol, diesel and CNG. The saved fuel in turn can be used to run industry and generate power. The amount spent on subsidising fuel during the last three years would have been sufficient enough to start a decent mass transit system in Karachi.

Finally, let us also talk about defence allocations in the forthcoming budget. In the aftermath of Abbotabad saga and the recent attack on a Navy base in Karachi one must question why a major chunk of tax payers’ money is being spent on our defence institutions which remain ill-equipped to handle threatening situations.

We need to focus on strengthening human security, making our people more resilient and less vulnerable through enhanced social sector spending and cutting the defence budget. Defence budget should also be presented before parliament for discussion.

It is a sign of insanity to keep repeating the same mistakes over and over again, expecting different results. It is high time we, as a nation, redefined our spending priorities in favour of ordinary citizens. If that is done our budget formulations would surely yield different results.

The writer is the executive director of Sustainable Development Policy Institute

URL: http://www.dawn.com/2011/05/29/slashing-a-budget.html

This article was originally published at: Dawn

The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.