The budget for 2008-09 has failed to address the basic issues
Like other budgets before it, the budget announced on June 11 has sacrificed long-term goals for short-term expediencies. Over the years, it is this kind of short-sighted approach that has kept the country poverty-stricken

By Kaleem Omar

We abandoned the concept of five-year plans in the mid-1990s. We then came up with the concept of annual rolling plans, though it was never quite clear what the word ‘rolling’ meant in the context of this formulation. Could it be that this rolling plan concept had something to do with the adage that “a rolling stone gathers no moss”? And could it, then, further be that this was why the rolling plans never amounted to much?  Be that as it may, a couple of years later rolling plans, too, were abandoned. Next, we came up with the concept of medium-term framework plans. But even these framework plans have been honoured more in the breach than the observance. In other words, budgets, in this country, have traditionally sacrificed long-term economic and social goals for short-term expediencies.

That is why budgets have failed to address the basic issues that have kept this country in the ranks of poor countries. These issues include Pakistan’s high population growth rate, high levels of illiteracy, and the growing trade gap – which in recent years has widened at an alarming rate. Like previous budgets, the budget for fiscal 2008-09 includes the allocation of highly insufficient sums of money to seriously address these and other basic issues that have kept the country poverty-stricken, with vast areas in Balochistan, interior Sindh, southern Punjab and NWFP’s Federally Administered Tribal Areas chronically underdeveloped and mired in the depths of poverty.

Tokenism seems to be the order of the day in many spheres of the nation’s economic and social sectors. The gap between the rich and the poor is growing, contributing in no small measure to increasing social tensions and a worsening law and order situation. There is lots of talk in government circles about changing things for the better and giving people a higher standard of living. But when all is said and done, however, more is usually said than done.

For the last decade or so, development planning has been based on an annual Public Sector Development Programme, or PSDP. But inefficiencies in the implementation mechanisms, overly optimistic budgetary revenue projections and a tendency to underestimate the expenditure side of public sector schemes have resulted in the annual PSDPs falling far short of most of their targets.

Exports, too, have fallen short of their targets, while the import bill has continued to soar, especially over the last five years, which have seen a five-fold increase in imported oil prices. In the last one year alone, oil prices have more than doubled to $ 135 a barrel. This has led to an alarming widening of the trade gap, which is currently running at about $ 1.6 billion a month, or about $ 19.2 billion a year. With oil prices likely to rise even further in the months ahead, the trade gap for fiscal 2008-09 is expected to exceed $ 21 billion.

It could be even more than this as the factor of rising food prices kicks in. Last year Pakistan imported 1.1 million metric tons of palm oil olein, 480,000 metric tons of crude palm oil and 96,000 metric tons of soybean oil, according to data compiled by the Pakistan Edible Oil Refiners Association. The country consumes about 3 million metric tons of edible oils a year, but produces only 500,000 metric tons to 800,000 metric tons of cottonseed, rapeseed and sunflower oil.

Pakistan buys a mix of refined and crude palm oil from Malaysia and Indonesia, the world’s biggest palm oil producers. Palm oil prices are at a record high these days, further adding to the country’s trade gap. During the period January to May this year, Pakistan imported 750,000 metric tons of edible oil, including 475,000 metric tons of palm oil olein, 215,000 metric tons of crude palm oil and 30,000 metric tons of soybean oil.

Palm oil imports are expected to increase to 180,000 metric tons a month in July and August this year, compared with an average of 125,000 metric tons a month because of higher demand in the holy month of Ramazan, which begins in early September this year. Higher imports, coupled with higher prices, will result in a further widening of the trade gap, putting more pressure on the balance of payments and leading to a further erosion of the country’s foreign exchange reserves – which have fallen by $ 4.5 billion in the last one year to their current level of about $ 12 billion.

Pakistan cannot get out of the poverty trap without reducing its population growth rate. But the budget for 2008-09 has allocated very few resources to check population growth. Successive governments have continued to tread on egg-shells when it comes to the issue of birth control. Nothing illustrates this mind-set better than the fact that successive governments have continued to use the misleading euphemism “family welfare” for birth control.

At Pakistan’s last official national census in 1998, the country’s population was 132.4 million, with an intercensual annual growth rate of 2.6 per cent. In mid-2001, the population was estimated at 142.5 million, with a growth rate of 2.1 per cent. At the end of 2007, it was estimated at 165 million, with a growth rate of 1.9 per cent – according to official figures. But these figures are disputed by independent analysts, who put Pakistan’s current population at 170 million, with an annual growth rate of 2.1 to 2.2 per cent. The next national census is due to be held in October this year.

Pakistan currently adds about 3.3 million people a year to its population. As in other rapidly growing countries, its population is young, with 41 per cent under the age of 15. Thus, the population of working age (18 years old or more) has to support more than 67 million minors.

At the time of the first post-independence national census in 1951, the area that now constitutes Pakistan (the former West Pakistan) had a reported population of 33.8 million, with a population density of about 41 people per square kilometre. According to the 1998 census, this density figure increased to 164 people per square kilometre, four times the 1951 figure.

Today, Pakistan’s population looms large in relation to its development and other goals. The tale of Pakistan’s population is like a Greek tragedy, heading inexorably towards a denouement. Whatever progress is achieved in economic indicators – be it agricultural produce, industrial output, GNP – will be vitiated, or at least seriously diluted, because of our burgeoning population. Unless forceful measures are adopted without delay, implemented efficiently and monitored strictly to determine that the reduction targets in the population growth rate are being met, the sheer logistics of feeding, educating, employing and caring for the basic needs of our people will become increasingly unmanageable. To make matters worse, over the past half century Pakistan has been left so far behind in the crucial area of reducing the population growth rate that we now have a great deal of catching up to do.

But the budget for 2008-09 reflects none of these concerns about the urgent need to vastly increase the monetary resources needed to reduce the population growth rate to more manageable limits.

Pakistan’s extremely high rate of population growth is caused by a falling death rate combined with a continuing high birth rate. In 1950 the mortality rate was twenty-seven per 1,000 people; by 1990 the mortality rate had dropped to twelve per 1,000 people. Yet throughout this period, the birth rate had remained at forty-four per 1,000 people. 

Education is the key to reducing the population growth rate. Yet Pakistan still has a very high illiteracy rate. Successive governments have claimed that the illiteracy rate has gone down and that about 50 per cent of the population is now literate. According to independent analysts, however, these government figures are greatly exaggerated. Analysts say that the actual literacy rate is about 30 per cent overall and much lower in the case of women and people living in the rural areas. In some neglected areas like Balochistan and FATA, the literacy rate for women is as low as 8 per cent.

This is a shameful state of affairs that needs to be remedied on a top priority basis. Yet the budget for 2008-09 has allocated very limited resources for literacy programmes, including adult-literacy programmes.

Between 1990 and 2000, Pakistan’s literacy rate increased by an annual average rate of 0.6 per cent of the population. The present rate is not much higher. At this pathetically low rate of increase, it will take Pakistan anything up to another 70 years or more to achieve full literacy.

The previous government allocated about Rs19 billion a year for higher education. But the people going in for higher education is already literate and constitutes a very small percentage of the population. Much of the rest of the population remains mired in illiteracy. Yet the allocations for primary and secondary education and adult-literacy programmes remain woefully inadequate. More than 50 per cent of all children of school-going age drop out of school after Class V for economic reasons. They are put to work by their low-income parents because they families need the extra money.

This, again, is an issue that needs to be urgently addressed. Yet the budget for 2008-09, like other budgets before it, reflects none of these concerns and has failed to allocate sufficient resources to address the problem.

Reverting to the issue of the growing trade gap, it needs to be pointed out that the gap cannot be reduced unless Pakistan is able to significantly increase its exports. To increase exports, however, we have to increase the production, quality, range and competitiveness of our exportable goods.

But in an annual competitiveness survey of just over 100 countries conducted by the World Economic Forum (WEF), Pakistan is currently ranked in the mid-70s. Moreover, this low ranking is likely to go down further when the new WEF survey comes out in October this year if the government keeps mandating increases in electricity and gas tariffs, POL prices and the cost of other manufacturing inputs.

Pakistan’s electricity tariffs are already the highest in the world. Much of this electricity is generated by gas-fired thermal generating plants. Yet the government has announced a whopping 30 per cent increase in gas tariffs from July 1 this year. This will make the electricity generated by gas-fired plants even more expensive and further reduce the competitiveness of Pakistani products in export markets. As if all this were not bad enough, the government has also announced a 7 per cent increase in the overall electricity tariff. This is separate from, and in addition to, the increase in electricity tariffs that will result from the 30 per cent increase in gas tariffs.

Meanwhile, foreign investment has dropped by 37 per cent during the first 11 months of the on-going fiscal year, 2007-08, which ends on June 30.