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Mini Budget: Much ado about nothing!

Monetary measures unveiled by the mini budget suggest that the government did not do its homework and, by and large, it intends to continue the policies of previous government. Instead of bringing any new sector or class of people in the tax net, the government has increased the burden on the existing taxpayers. It did not scale back non-development expenditures but has cut the development budget, which will pull down the economic growth rate to a level that will not be sufficient to absorb new entrants in the job market. Asia Development Bank has estimated 4.8 percent growth for the current fiscal against last governments’ projection of 6.2. Despite trumped up austerity drive, the cost of running the civilian government has been reduced by only Rs3 billion.

Nonetheless, government’s measures of financial discipline stand unfolded. Some real, some symbolic; put together they indicate a tough spell for a common man. Finance minister said these are only emergency measures and the economic reforms will be introduced in coming weeks. He described “increasing employment, enhancing economic stability and supporting exports” as top priorities of his government. These ‘emergency’ measures lack the conceptual shift that is needed to document the growing informal economy and increase economic growth to create more jobs.

The proposed Rs1.9 trillion (5.1 percent of Gross Domestic Product (GDP) budget deficit target is Rs89 billion higher than the original budget deficit target. The finance minister said if no measures were taken the budget deficit could shoot up to Rs2.9 trillion (7.2 percent of GDP). That is the budget volume could have gone up to Rs6.1 trillion by end of fiscal year as against Rs5.246 trillion projected in the main budget. However, despite Rs814 billion fiscal adjustment, the revised size of the budget will be Rs5.3 trillion; Rs63 billion or 1.2 percent higher than the original budget for this fiscal year. This is because the government has increased the current expenditures budget to Rs4.4 trillion (an increase of Rs234 billion or 5.6 percent of the original budget of this fiscal).

Government has lowered the annual tax collection target to Rs4.4 trillion, deviating from its pre-election promise of increasing revenue collection and reducing reliance on indirect taxes. The Rs4.398-trillion target is only 14.4 percent higher than the collection of Rs3.841 trillion in the previous fiscal year. New government PTI had promised to increase revenue collection to Rs8 trillion. To achieve this, first year target should have been at least 20 percent higher.

Effects, which have begun showing up are not due to trickle down of reforms, but due resource squeeze.  Worst hit is Public Sector Development Programme. Nearly 450 schemes, costing 1.6 trillion rupees, which were in the pre-approval stage, have been dropped. Government has decided to release Rs4.5 billion for construction of 8,276 housing units for labourers. Employees Old Age Benefit Institute (EOBI) pensions have been upped by 10 percent. And 52 item categories of medical instruments and equipment from sales tax. Earlier decision to increase petroleum levy by three fold to Rs30 per litre has also been withdrawn. This will result into Rs110 billion cut in non-tax revenue estimates. Government has lowered the cost of doing business by providing Rs44 billion relief to the five export oriented sectors.

Pakistan’s current account deficit (CAD), caused by higher expenditures in foreign currencies than the earnings, has begun to decline. It narrowed down by $600 million in August 2018 compared to the previous month because of a notable drop in imports. It stood at $2.12 billion in the previous month of July. Imports slowed down 19 percent to $4.47 billion compared to $5.49 billion in July.

Two main pillars of economy agriculture and textile industry have been given added incentives. Textile that accounts for 60 percent of net exports is thrilled on a massive cut in input costs. The cut in duty on 82 items would give a benefit of Rs5 billion to the textile industry in remaining months of the current fiscal year 2018-19. Moreover sector would get gas supply on subsidised rates. This is in addition to the Rs44-billion benefits the industry is being provided through gas subsidy to make the utility price uniform across the country. Textile sector is hopeful of doubling the exports within five years. Government has also promised to reduce electricity tariff for the industry to the regional competitive level. Agriculture got support prices upped alongside multi-billion subsidy in fertilizer and gas.

Finance Supplementary (Amendment) Bill 2018 has continued the tax measures of previous regime. However, some of the efforts to document the informal economy stand reversed, at least for the time being. More innovative measures need to be thought about rather than axing own feet. This is all the more important as country is struggling to get out of the Financial Action Task Force (FATF) grey listing.

The government also increased the sales tax on RLNG supply to all the sectors to the standard 17 percent. The reduced 12 percent tax will now be available only on supplies of RLNG/LNG to gas transmission and distribution companies. This will increase the cost of cement, fertiliser and CNG production. Gas tariff has been upped up to 143 percent in one go, one hopes that its comprehensive impact has been calculated. The regulatory duties have also been increased or levied on 612 tariff lines.  While tax revenues target is down by Rs169 billion to Rs4.72 trillion non-tax revenue estimate has increased by Rs121 billion to Rs893 billion. The government’s net revenue receipts have been projected at almost original budget target level of Rs3.04 trillion after transfer of Rs2.6 trillion to provinces as their shares in federal taxes. This has left the government with an overall budget deficit of Rs1.9 trillion or 5.1 percent of the GDP against IMF guideline of 4 percent.

Mini budget indicates that government is in a “go, no go” state with regard to availing IMF bailout package, however, it has a responsibility towards protecting general public against undue economic hardship. Hopefully, the good sense would prevail, and financial matter would be handled in a professional manner.

 

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Selective Assessments of Human Rights Status

These times are witnessing increasingly selective assessments regarding Human Rights status across the World. And slogan of Human Rights has become a tool for furthering hidden strategic objectives. In response to the letter, written by HRW Asia Director Brad Adams to Prime Minster Imran Khan, on August 24, Federal Minister for Human Rights Shireen Mazari responded: “I hope that you would also raise your voice against a massive human rights violations, carried out in the Indian-occupied Kashmir, Palestine and in some European States against Muslims citizens.” Minister also urged HRW to take up the issue of the violation of human rights by some European states against their Muslim citizens in the form of curtailing their right to practice their religion freely and in the form of abuse of Islam and its Prophet (PBUH), in direct contravention of the European Convention for the Protection of Human Rights and Fundamental Freedoms. “Since HRW claims to monitor human rights across the world, I would like to be informed on how you are ensuring the rights of Muslim citizens to have their mosques and be able to dress and practice their religion freely and without ridicule in European states,” she added. She went on to ask that since the HRW claims to monitor human rights violations in over 90 countries, “I hope that would include the massive human rights violations being carried out as a matter of state policy by India in Indian Occupied Kashmir. Minister also said that she would like to be informed on how the NGO is “ensuring the rights of Muslim citizens to have their mosques and be able to dress and practice their religion freely and without ridicule in European states”, which have seen an upsurge of xenophobia in recent years. Pakistan government would always welcome positive suggestions, but “an NGO’s institutional credibility will rest on its commitment to ensure human rights across the globe and not just in selective states.” She added. In a blatant violation freedom of information norms, India’s home ministry abruptly withdrew the security clearance granted to Qatar’s Al Jazeera network after a documentary on Indian-occupied Kashmir (IoK) was aired by the channel. Now, matter is under consideration at appellate level. According to Times of India, the report leading to this action had highlighted the protests after the killing of Burhan Wani in 2016 and the brutal use of pellet guns against protesters amongst other Human Rights violations in IoK. Report was deemed by Indian government as biased. The Economic Times has added that “the television channel will be taken off air if the Home Ministry strikes down the review petition filed by Al Jazeera”. Moreover, Indian government has also rejected recent reports by Amnesty International and Office of the High Commission for Human Rights (OHCHR) on atrocities being committed by the Indian security forces in IoK. “Once again we find out that Kashmiris are the ones having to pay the price for the political battle”. In a related development, Meenakshi Ganguly, the South Asia director at Human Rights Watch (HRW), has “urged the Indian leadership to admit that human rights violations are taking place on their side of the Line of Control (LoC), and they must work with Pakistan to find a solution that puts the interests of Kashmiris first”. She said it is about time leaders in both India and Pakistan realized that Kashmiris are living in a conflict zone and suffering human rights violations. “They must understand and acknowledge this and ensure that human rights of these people are not violated anymore. It needs to happen right now… this should be about Kashmiris who are suffering.” When asked to comment on misuse of special powers given to the Indian military, Ganguly said that not only the UN but also other groups and commissions, including those, formed under the Indian government have also appealed to the government to repeal such laws. Commenting on the role rights groups like Amnesty and OHCHR could play to make India more accountable over Kashmir issue, especially when Modi government is targeting almost all minority ethnicities in the country, she commented that the voice of dissent should not become the political tool. “Unfortunately this is what happens way too often”. Commenting on increasing communal violence by pro-BJP vigilantes against religious minorities in the country, Ganguly said the environment of an extreme form of nationalism violates religious freedom. Prime Minster Imran Khan has recently said that little noteworthy progress has been made in the past to find a solution for the Kashmir issue. He said so while meeting Pakistan’s Permanent Representative to the United Nations Maleeha Lodhi before assuming office, adding that through the UN resolutions on Kashmir a solution must be found for this intractable issue. Now an extraordinary situation is developing in IoK in the wake of BJP government’s attempts to abrogate Article 35-A of the constitution that grants special status to the occupied territory and its citizens. India is using all cheap tactics from brute use of force to political and constitutional aggression for forcing the occupied territory completely to its fold. The Kashmiri leadership has made it clear that they will fight with full resilience to foil the nefarious designs of India. Pakistan government must approach not only the International Court of Justice (ICJ) but also the United Nations Security Council and the Organization of Islamic Cooperation to prevent the Indian government from going ahead with its plans of changing demographic nature of Jammu and Kashmir.

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