Coming to a halt

Development budget is the first casualty of any economic
catastrophe that a country has faced
By Syed Bakhtiyar Kazmi

In a welcome act of cooperation, the government and opposition sat down together to agree solutions to the current financial crisis that the country is faced with today. Notwithstanding that yester generations would most likely comment that the financial crisis is a part of living memory, things are getting bleaker as the clock ticks.

From a booming economy, as we were told a few years ago, we are at a point where we have difficulty footing our fuel bill. The severity of the looming bankruptcy can be gauged from the apparent limited solutions available to the financial wizards of the joint committee. Uninformed criticism is just noise and while the critic in such scenarios may bask in glory the laurels most definitely vest with the champions who battle it out in the coliseum. Nonetheless, it is distressing to note that the sword of Damocles once again fell on the development budget.

One whole-heartedly subscribes to the dictum about living within one’s own means. However, if efforts are not made to grow the means, the options will continue to shrink, most ostensibly due to inflation alone. With a growing population and shrinking means we continue to move towards the black hole. Without a development plan and earmarking of necessary resources, there is a risk we will remain a developing nation in the foreseeable future. The pessimists will continue to argue that having a development budget alone will not take us to a developed status given that over the past many years we have contracted billions of dollars of debt and have not much to show for it. The appropriateness of the development plan and basis of selection for each project, however, is a separate Pandora’s Box.

Curiously, while there is a lot of coverage in the media on judicial and political issues, the slashing of the development budget appears to have been digested with relative ease. We live in a world of wants. World trade flourishes on the wants of the populace and favourable trade alone signifies the strength of a nation. Wants beget resources and the mere existence of resources is not sufficient in the current technologically-advanced environment.

Success as a nation in today’s competitive environment requires development of resources. The current argument on Reko Diq is an excellent example. The intent is not to undermine military strength, but in essence such strength remains dependent on financial resources. Development remains one of the most critical objectives for Pakistan.

The primary function of a government is the maintenance of an environment conducive for trade and employment supported by provision of justice. Arguably, almost all of our troubles today can be traced back to increasing unemployment and lack of trade opportunities. In hindsight, our past governments may have comprised our present for the sake of financial convenience alone. The pertinent question being, should this be allowed to continue?

In the aftermath of a devastating flood, a resource-draining unwanted war, global recession and worldwide speculation in commodities, this may have been the only option. Historically, development budget is the first casualty of any economic catastrophe that the country has faced most likely due to its inherent vulnerability to subjective decisions.

Where are the assurances that efforts are afoot to ensure a brighter future? Reducing development budget to show reduction in revenues does not require rocket science.

From the limited knowledge generally available, it can be deduced that in the light of our debt and security obligations the only way to enhance our development budget is through increased revenue. However, taxation remains a contentious issue and there is no point in singling out agriculturists. No one in the world wants to pay tax, if it can be avoided. Consequently, this will require “out of the box” thinking.

Subsidy is another Waterloo in the quest for balancing the budget. Politically motivated subsidies have generally been directed towards consumption and are in most cases a waste. While it is necessary to support the less fortunate segments of society, an across the board subsidy is undesirable. Subsidy should be targeted towards the deserving only which again requires “out of the box” thinking. In respect of petroleum prices, a mechanism to subsidise public transport as an example dedicated fueling points may have weathered the storm. Alternatively, increased custom duties and annual registration on luxury vehicles would only have targeted the rich. The war on terror should provide ample excuse to sidestep any restrictions imposed by the WTO.

While micro management is a tedious task, it is doable. In a world dominated by free markets and democracy, China is Nassim Taleb’s Black Swan. With an envious growth rate of 9.8 percent while the world struggles with recession, China is the perfect example of government’s business being business. It probably would not be harmful to study and replicate their development model; an extensively planned economy may be the final solution for us.