Insaf Professional Forum held a Budget Seminar on 16th June, 2012 in Karachi with Asad Umar as main speaker and a panel to analyze Pakistan’s budget, 2012- 2013. The panel consisted of Mr Sayyem Ali, Chief Economist of Standard Chartered Bank, Mr Sohail, CEO of Top Line Securities and Mr Farrukh Khan, Director BMA Capital.
Mr Sohail analyzed the budget of Pakistan for the Fiscal Year, 2012-2013. He pointed out the following:
The past four years have seen the slowest growth in Pakistan with an average GDP growth rate of 2.9 % per year.
External shocks were blamed for this slow growth rate, however, neighbouring countries like India and Bangladesh have seen high growth rates of 7.8 % and 6.8 % respectively so they don’t appear to be affected by these external shocks.
Investment to GDP ratio has declined from 22.5% in FY 07 to 12.5% in FY 12.
Presently, we are undergoing the slowest growth period in the history of Pakistan. India’s per capita growth rate is 6%.
Employment opportunities are not created in such conditions.
While global Foreign Direct Investment is increasing, Pakistan’s FDI has declined to one-tenth of what it was in 2007.
All fiscal targets have been missed and revenues were short of Rs 500 bn/year of budgeted target.
Last 4 years’ budget deficit was Rs 4.3 tn compared to the budgeted target of Rs 2.8 tn that is extra deficit of Rs 1500 bn. In FY 12 alone, the deficit is Rs 1.5 tn (7.5% of GDP) as per government estimates.
Rs 4.3 tn deficit was 88 % financed by local sources, and only 12 % was financed by external sources. Of local financing, Rs 2200 bn have been taken from banking sector and the rest from non-banking sources.
Mr Arif Alvi
Mr Arif Alvi, Secretary General PTI, also spoke to the audience briefly and said that Pakistanis are a very talented and gifted nation and all is not lost. We just have to put a brake to the downward spiral of the economy.
Solutions by Mr Asad Umar
Mr Asad Umar complimented IPF Sindh for holding such a big event and presenting a good analysis of the budget. He said that the country is on the edge now and we cannot afford another shock to the economy.
He said that Rs 2 out of 3 of the net revenue of the government is going into the payment of interest of debts. After some years, the government is just going to pay interests and will not be able to do anything more.
We have no choice but to reform fundamentally. Pakistan needs a tax to GDP ratio of 14 – 15 %.
Agricultural taxes have to enforced as it is unfair to tax salaried people and not landowners and land workers.
Documentation of economy is also a very important problem. The principal issue is not collection of taxes, but the documentation of economy.
The one who collects taxes should have the moral authority to ask for taxes, as in he should be paying taxes himself to ask for them.
The citizen giving taxes should be sure that his money will not go into anyone’s personal account but to the welfare of the state.
Pakistan also needs tax administration reform. Technically competent people should be there.
2 % GDP losses can be completely eliminated. 70 ministries and their divisions must be reformed.
Reorienting Pakistan from Elite to Citizen would be phased over 3 to 5 years. Total improvement would be 9 %, with 3.3 % fiscal deficit reduction and 5.7 % increase in development expenditure.
We have to change the direction of welfare of people from elite to the common person.
The seminar ended with a Question & Answer session in which the speakers comprehensively answered questions from the audience, followed by tea.