An overview of 2016-17 Budget

Gen Mirza Aslam Beg

Three years back the government decided to “beg and borrow”, to correct the economy and save the country from going into default. They did succeed in achieving the primary objective but this simple answer to the complex issue has created myriad problems as one can judge from the comments of our eminent analysts:
“Aid reliant Pakistan has purse strings controlled by IMF/USA. Foreign aid does not reduce poverty; it offers little in terms of policy design and as monetary policy runs out of bite, it will take a fresh crisis to force new thinking to emerge; this budget is politics by the means repeated year after year; it is business as usual; it has failed to adopt an egalitarian approach that deplores extremes of wealth and poverty, thus unbalancing the social order; budget is an instrument of social change through education and health, but it promises little for the over 2 million jobless youth and debt free economy; budget is simply a revenue and expenditure narrative, promoting not growth but fiscal consolidation; no reforms, no tax structuring; it is a budget by the elite, and for the elite, of the political order supporting oligarchic order; they “claim high growth trajectory” but there is negative growth in agriculture, which contributes 6% to GDP; drop in export and investment, and all targets missed. However it is a good budget for the poor parliamentarians whose present Rs. 80,000 a month pay and perks go upto Rs. 470,000 a month. Congratulations.”
The strategy for social change, driven by foreign debt, dole and aid, places serious strains on our economy while the stress is on fiscal consolidation, than growth. The budget thus reminds me of Ghalib, who said: “ Qarz ki petay thae mae aur kehtey thae kae haan, Rang lae gi humari faqa masti aik din”. The implosion effect of our faqa masti will show its colour. Let us examine.
The volume of the budget is Rs. 4400 bn, out of which we pay, Rs. 1800 bn, as debt servicing, which is 41% of the budget, leaving only Rs. 2600 bn to “mastermind the budget plan”, between the rich and the poor. Those living under the poverty line are 30% and above this line are 40%; 25% are the lower and upper middle classes and the remaining 5% are the privileged class. For poverty alleviation, allocation is 2.6%; education 1.8% and health 0.27% — a total of 3.4% is the very generous allocation for the 80% under privileged Pakistanis. Agriculture gets Rs. 700 bn which is 15.9% of the budget and likely to fall in the hands of the big landlords, holding “bainami khatas”, leaving very little for the genuine land holders.
Defence gets Rs. 860 bn, which is 19.55% of the budget and 2.62% of the GDP which stands at Rs. 32,700 bn. Our defence budget at 2.62% of GDP is much lower than, 4.70% of the Indian defence budget. The rule of the thumb is that, the defence budget must remain within 2% to 2.5% of the GDP. Our defence budget is well within these limits, maintaining more than 650,000 foot soldiers at a minimal annual cost of Rs. 0.8 mn per soldier; India is Rs. 1.7 mn; Saudi Arabia Rs. 2.7 mn; Turkey Rs. 3.0 mn and USA Rs. 42.5 mn. Yet Pakistani armed forces are one of the best in the world, paying the debt to the nation with their blood, raising the level of performance to heights, acclaimed world wide. Thus our armed forces, through their demonstrated capability are maintaining a level of deterrence, by means of a “knowledge based defence policy of development and strategy to fight out-numbered.” This phenomenon I have explained in my article, “China Pakistan Strategic Pivot”, published a few weeks earlier.
This year budget has come hard on our nuclear programme by cutting down the allocation to Rs 27 bn from Rs. 54 bn of the year 2014, while India has allocated Rs. 1000 bn (one trillion) for its nuclear programme development. Whereas the Full Spectrum Nuclear Deterrence Regime, that Pakistan has achieved by means of a unique nuclear science and technology technique development by Dr. Abdul Qadeer Khan and his team of experts. It is a success story of dedication and sacrifices, supported by strong political will. My recently published article, titled “Full Spectrum Nuclear Deterrence”, explains this phenomenon.
Our defence forces achievements and the nuclear deterrence capability developments are the two success stories demanding similar approach from our economic planners to create a knowledge-based economy, “before our monetary policy runs out of bite, it will take a fresh crisis to force new thinking to emerge.”
— The writer is ex-Chief of Army Staff, Pakistan.