Budget expectations and possibilities

[Lahore_Real_Estate]

In the modern era budgets are not merely a statement of revenue and expenditure of the government but a comprehensive manuscript that mirrors state of the economy, delineates a set of policy initiatives to nudge and accelerate growth and unfurls measures envisioned to promote the well being of the masses. Because of their wholesome character they affect each and every segment of the society in one way or the other. That adequately explains why people evince so much interest in the budget and the expectations that they have in regards to improvement in their economic situation.
Frankly speaking the state of the economy is not in an enviable position with projections of a 2.4 % growth in GDP during the current fiscal year and the budgetary deficit escalating between 6-7% of the GDP. The mother of all the economic ailments afflicting the economy and obstructing growth, the budgetary deficit has spiked to Rs.11.2 trillion. It has increased sharply to 66 percent of the GDP in March this year from 54.5 per cent in June 2007 which is attributed to excessive borrowing by the government from outside and from the banking system within the country. The detractors of the government heap opprobrium on the government for its inability to check this trend and pushing the country into an economic spin.
The criticism of the government in this regard, is not wholly justified and is being hurled completely out of context. These critics are not prepared to give it the allowance for the fact that the country had to bear an additional burden of US$ 74 billion due to war on terror, the devastation wrought by the floods that will require Rs.160 billion to rebuild the infrastructure and the huge liability that had to be shouldered for the rehabilitation of the IDPs. The dilemma for the government is that it perforce has to borrow considerably to invest in defence, public services, infrastructure projects, dams, electricity generation, etc. etc. During the current fiscal year it had to borrow excessively from the central and commercial banks because of its inability to implement RGST for raising tax revenue and the squeeze on the external funds which were reduced to Rs.89 billion in the first 10 months of the year against an anticipated inflow of Rs.566 million for the entire year.The precarious law and order situation in the country, a corollary to the war on terror, also discouraged the prospective foreign investors to invest in the country. Rising oil and food prices internationally also had a negative affect on the economy besides adding to the economic woes of the people by nudging inflation. It is thus evident that all these factors were beyond the control of the government. The sluggish economic growth, uncertain political and security environment and irregular flow of funds from donors and multilateral financial institution forced government’s hand to continue borrowing to meet its inescapable needs.