The Budget 1996-97 For Whom the Bell Tolls? (Part 1/2)
Reflections
‘The time has come’ the Warlus said ‘to talk of many things: of shoes -- and ships -- and sealing wax -- of cabbages -- and kings --’
(Lewis Carroll)
There are two ways of reducing the gap between revenue and expenditure. Our kings -- and queen(s) -- usually think of only one: increasing the revenue, which, is generally done through borrowing or taxation or both. Yet, another alternative has always been there: reducing the expenditure -- the wrong kind of expenditure.
Expenditure which either eats up the stock of capital goods more than it adds to it or adds such ‘items’ as make the rich few richer at the cost of the rest certainly needs to be curtailed, if not eradicated completely.
The problem is that the ‘unhallowed hands’* of the king’s vizier -- called modern economist -- have deliberately disturbed ‘the wisdom of our ancestors’ that all debt is evil (and therefore ‘the country’s done for’). The modern economist has told the king that borrowing may not be bad after all, for it can help to mobilise resources and stimulate activity. But he has forgotten that a king is a king -- the king is always more interested in his rule than in the economic wisdom necessary for following the vizier’s advice with discretion.
So the kings and queen(s) continue to borrow and tax for the wrong kind of expenditure -- palaces and courts and coaches and apparel and adornments and merry making. The kings and the queen(s) and the nobility live happily ever after. The subjects suffer. This is morally despicable -- and very bad economics, for there is no factor of production more important -- economically and socially -- than man. Who knows, the son of a pauper might turn out to be another Einstein or an Edison or a Lee Iacocca or, if nothing else, the average, very innovative entrepreneur who is so essential for the pervasive development of an economy. When a tiny fraction of the whole population, ‘the nobility’, uses the magic wand it has -- demand (which is not needs and requirements of the economy -- it is money votes to produce whatever is voted for) -- for palaces and adornments, while the majority, containing millions and millions of potential innovators, entrepreneurs, thinkers and skilled workers, cannot even get the share of resources to get out of the vicious trap of poverty which confines their potential to the most menial of chores for the rest of their lives -- generation after generation, a lot of rethinking needs to be done. The problem then is not the budget. It is the structure of the economy -- and the kings and the queens and the nobility. The big question is: will we ever find an ‘Umar bin ‘Abd al-‘Azizto get rid of the cruel traditions of monarchy? (Hello! Hello! Imran Khan. Hello! What are you up to? Everyone is waiting. Can you be the ‘Umar bin ‘Abd al-‘Azizthe country needs? Or are you also going to be another king?).
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In the following pages, statistical analyses of the budget have been presented, which, it is hoped, will be intelligible to the layman. Figures in the bold print are particularly noteworthy.
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After the statistical analyses, excerpts from different articles on the budget have been given. Although the editors may not share all the views expressed in the excerpts, they feel that the readers might find some interesting information and opinions in these passages.
STATISTICAL ANALYSIS
I. REVENUE BUDGET
A. Current Revenue
Billion Rs. %
1. Tax Revenue
a) Direct taxes 86 29
b) Indirect taxes 210 71*
|
|
Rs. %
Sales tax 57 27 Customs 98 47 Federal Excise 55 26 ------ ----- 210 100 === === |
------- 100 ==== |
Total tax revenue 296 72
2. Non-tax revenue 91 22
(Income from property and enterprises)
3. Surcharges (Natural gas and
petroleum) 26 06
------- -------
Total gross revenue receipts 413 100
====
Less: share of provinces 133
-------
Net revenue 280
====
B. Current Expenditure
Billion Rs. %
1. Debt servicing 186 47
2. Defence 131 33
3. Other administrative
services 48 12
4. Grants to provinces,
AJK, Railways, etc. 22 06
5. Subsidies 08 02
------- -------
Total revenue expenditure 395 100
====
Less: Deficit in revenue
budget 115
-------
280
====
II. ANNUAL DEVELOPMENT PLAN (ADP)
A. Development Expenditure
Billion Rs. %
1. Federal government 80 76
|
|
Rs. %
Federal Ministries/ 44 55 divisions Corporations 28 35 Special Programme 8 10 ------ ----- 80 100 === === |
2. Provincial Programmes 25 24
|
|
Rs. %
Punjab 9 36 Sindh 8 32 NWFP 5 20 Baluchistan 3 12 ------ ----- 25 100 ==== === |
------- -------
Total development expenditure 105 100
==== ====
B. Financing Pattern
Billion Rs. %
1. External resources 103 65
|
|
Rs. %
a) Project aid 61 60
b) Non-project aid 42 40 ------ ----- 103 100 ==== === |
2. Net capital receipts 26 16
|
|
Rs.
a) Receipts 78
b) Disbursements (52) ------ 26 ==== |
3. PSDP Financing 28 18
|
|
Rs. %
a) From Privatisation Fund 14 50
b) Self-financing by 14 50 provinces ------ ----- 28 100 ==== === |
4. Financing of National Drainage
Prog. by Punjab & Sindh
(around Rs. 1 billion each). 2 1
------- -------
159 100
==== ====
C. Balance
Billion Rs.
1. Total Resources 159
2. Total development expenditure 105
-------
54
====
III GAP
Billion Rs.
1. Expenditure 500
|
|
Rs. % Revenue expenditure 395 79
Development expenditure 105 21 ------ ----- 500 100 ==== === |
1. Total Resources 439
|
|
Rs. %
Revenue receipts 280 64 Capital receipts 26 06 Privatisation proceeds and provincial self financing of PSDP 30 7 Foreign Aid 103 23 ------ ----- 439 100 ==== === |
-------
Gap 61
====
IV TACKLING GAP
Billion Rs.
Gap 61
Less:Bank borrowing 20
-------
Unexplained 41
====
V NEW TAXATION MEASURES
Billion Rs. %
1. Direct taxes 4.3 10
|
|
Rs. %
Income tax 2.50 58 Foreign travel 1.00 23 Capital value tax 0.60 14 Wealth tax 0.20 5 ------ ----- 4.30 100 ==== === |
2. Indirect taxes 36.55 90
|
|
Rs. %
General sales tax 25.30 71 Custom duties 7.60 21 Central excise 2.15 06 Admn. improvement 1.00 2 ------ ----- 36.55 100 ==== === |
-------- -------
Total new taxes 40.85 100
===== ====
VI DEBT SERVICING
A. Break-up of debt servicing expenditure
Billion Rs. %
1. Domestic debt servicing 113 61
2. Foreign debt servicing 73 39
|
|
Rs. %
Foreign debt servicing 28 38 Foreign debt retirement 45 62 ------ ----- 73 100 ==== === |
------- -------
Total debt servicing 186 100
==== ====
B. Debt servicing as a percentage
of revenue and expenditure
1. Debt servicing (Rs. 186 billion) as 186
a %age of current revenue (Rs. 413)--------x100 = 45%
(that is of revenue receipts) 413
2. Debt servicing (Rs. 186 billion) as 186
a %age of current expenditure --------x100 = 47%
(Rs. 395 billion) 395
3. Percentage increase over last year
Billion Rs. %
Debt servicing this year (1996-97) 186 --
Debt servicing last year 157 --
------- -------
Increase in debt servicing 29 18
==== ====
(Total government borrowing from the domestic market last year Rs. 39.5 billion)
(Asif Iftikhar)