Monday, May 28, 2012
ISLAMABAD: Unveiling the shadow budget for the 2012-13 fiscal year, the Muttahida Quami Movement (MQM) Sunday proposed a 10 percent reduction in defence allocation as well as providing an additional Rs250 billion in energy subsidies to eradicate the monster that is the circular debt.
While simultaneously occupying the treasury benches as well as enjoying a representation in the federal cabinet, the PPP ally, for the first time in the country’s history, came up with the initiative of a shadow budget which is usually a tactic resorted to by opposition parties in modern politics.
Flanked by members of the MQM economic team, Farooq Sattar — the party’s parliamentary leader in the National Assembly — said that the party had proposed the imposition of an agricultural income tax through a federal mechanism in order to root out corruption in the tax collecting agency and to correct Afghan Transit Trade in a bid to generate additional revenues to the tune of Rs500 billion.
Addressing a news conference on Sunday, the MQM also proposed to do away with unexplained subsidies, while retaining the Rs150 billion subsidy for food and fertiliser support in the upcoming budget.
On the relief side, the MQM proposed a reduction in the GST rate from 16 percent to 12 percent, as well as abolition of the petroleum levy. It also promised to prescribe a maximum land holding and said that absentee landlordism would be curtailed. The party — enjoying a majority in the largest urban centre of the country –- however proposed no increase in salaries or pensions of public sector employees.
In response to a query about the increase in salaries of government employees, Farooq Sattar said that everyone would have to tighten their belts. He also suggested that the salaries of ministries and federal secretaries in Grade-22 be deceased.
In order to cut down the budget deficit by more than 50 percent in 2012-13, the MQM proposed to scale it down to Rs575 billion from Rs1,143 billion in accordance with the budget estimates of the current fiscal year i.e. 2011-12. The fiscal deficit would be financed through Rs200 billion in the form of domestic debt non-banking, Rs300 billion in the form of domestic banks, and by obtaining foreign loans amounting to Rs75 billion.
The total outlay for the budget proposed stood at Rs3.530 trillion, out of which the federal government’s total revenues touched Rs2.180 trillion following a transfer to the provinces to the tune of Rs1.550 trillion. Current expenditures proposed stood at Rs2.775 trillion while development expenditures amounted to Rs500 billion.
Tax revenues were estimated at Rs2.750 trillion for the next budget, with the share of direct taxes amounting to Rs1.255 trillion, and indirect taxes including customs duty, sales taxes and federal excise duties amounted to Rs1.495 trillion. The non-tax revenue, meanwhile, was estimated to the tune of Rs780 billion including Rs195 billion from property income, Rs180 billion from SBP profits and Rs300 billion from other sources.
Debt servicing is expected to cost Rs1,000 billion, defence expenditures Rs450 billion, and subsidies Rs500 billion.“The country’s economy is on the brink of collapse and out-of-the-box solutions are required to overcome economic woes,” Farooq Sattar said during his announcement, and proceeded to propose that the allocation of the PPP’s brainchild program (the Benazir Income Support Program) be capped at Rs25 billion while another Rs25 billion be allocated for the Benazir Income Generation Program.
He said that the MQM had proposed a 10 percent reduction in the defence budget while proposing to cut civilian government expenditures to 30 percent.With the steps proposed by the MQM in the 2012-13 shadow budget, Farooq Sattar claimed that the prices of flour could be reduced by 50 percent, daal chana by 30 percent, mutton by 20 percent, roti by 200 percent and petrol by 20 percent.
In an awkward move, however, the MQM proposed to cut down the discount rate by 2 percent, bringing it down from 12 percent to 10 percent knowing full well that it was the domain of the central bank that enjoyed autonomy and the Finance Ministry could not intervene in its policy matters.The MQM also proposed abolishing subsidies for public sector giants such as PIA, Pak Steel and others in the upcoming budget.