Pakistan’s Minister of Finance, Syed Naveed Qamar finally delivered his long awaited budget speech for 2008-09 in Parliament House. This devastating budget represents another illusive budget declared by another failing administration which contains nothing for the majority of the people of Pakistan except deprivation and destitution.
The facade presented by these regimes today and the ones in the past, cannot hide the growing financial disaster engulfing the country – ongoing wheat shortages and the huge surge in the price of basic commodities including rice, sugar, milk, meat, petrol, gas, electricity and everything else. The State Bank of Pakistan governor recently warned that “‘Food inflation will touch 26 per cent and maybe more in the upcoming days”.
The delay in announcing the budget for several days has been attributed to Prime Minister Yusuf Raza Gilani leading a frantic effort to seek emergency economic assistance from Saudi Arabia. Despite taking these measures, sales and other business taxes have been ruthlessly increased and subsidies on basic needs such as food and fuel have also been slashed from 407 billion rupees to 295 billion rupees. This is why fuel prices have again been increased, with the announcement that every two weeks they will be adjusted to reflect ‘International Market’ rates. Gas prices too have also been increased by 31%. These regressive steps will bring immense suffering for the majority of the people of Pakistan and contribute towards the economic abyss the country is falling into. The government has attempted to substantiate these measures on budgetary grounds; however, its disingenuousness is clearly exposed as it still has funds to continue the Capital Gains Tax exemption on the sale of shares for Pakistan’s upper class.
Superficial measures such as raising salaries for government employees cannot mask the underlying structural problems with Pakistan’s economy; a complete lack of industrialisation and scientific research, shortage of electricity and energy infrastructure development, deficiency of investment in developing Pakistan’s human resources, exploitation by western multinationals and foreign institutions’ who dictate economic policy – the list goes on.
State Bank of Pakistan figures reveal that Pakistan’s external debt has grown to nearly $46 billion, an increase of 14.4% on last year. The government paid nearly $3 billion dollars in annual debt servicing payments in the last financial year; this year it will be even more. The internal debt also stands at 3011 billion rupees ($43 billion), an increase of 16.2% on last fiscal year. Together the debt servicing payments amount to nearly 40% of the entire budget of 2010 billion rupees ($30 billion). Pakistan has barely increased the Defence budget to 296 billion rupees; a cut in real terms after record inflation is taken into account. The government also borrowed a record Rs 661 billion rupees ($9.9 billion) from the Central Bank in the last financial year, effectively printing more paper money. This has not only resulted in more debt and devaluing the rupee but has directly fueled inflation, increasing prices indiscriminately across the board.
With the country on deeply entrenched in financial arrears there can be no realistic possibility of relief for the common man by a debt ridden government. The Balance of Trade deficit from July 2007 till March 2008 has already reached $18.3 billion, with it expecting to reach $21 billion at the end of June this year. With foreign exchange reserves standing at $10.9 billion at the end of the first week of June 2008, Pakistan is heading for a foreign exchange crisis as it must cover the expected Balance of Payments deficit of around $8 billion for this financial year which is ending and cover the growing import bill in the weeks ahead. This is why the rulers are desperately begging for $3.5 billion in foreign exchange in the next few weeks. This is reflected in the rupee devaluing nearly 11% in the last two months against the dollar at a time when the dollar itself is devaluing on the world’s financial markets. This is the damning indictment of Pakistan’s economy.
With orders being given to slash food and fuel subsidies and to increase electricity and gas prices the truth of the matter is clear for all to see – this budget has not been set in Islamabad but dictated the boardrooms of the IMF and the World Bank in Washington. Ishaq Dar proudly said in Washington soon after the election that Pakistan will continue with the previous government’s economic policies. It is the polices devised by these foreign institutions, such as the World Trade Organisation (WTO), in the name of ‘structural reforms’ and ‘market liberalisation’ that have led to the ruin of Pakistan’s economy. With the fragile economy being opened to seasoned Western multinationals, domestic industry does not stand a chance to compete and provide jobs for the poor. The disaster of the food crisis in Pakistan is made all the more bitter by the fact that Pakistan has been blessed with huge agricultural resources; Pakistan is one of the world’s top ten producers of wheat.
Despite this fact, the government of Pakistan in collusion with the West has ensured Pakistan remains enslaved. The treacherous rulers of Pakistan are not in interested in the welfare of the people. While growing numbers of the poor are committing suicide because they cannot feed themselves and their families the ‘coalition’ government continues with its infighting. Blessed by their patron, America they continue to support her so-called ‘War on Terror’ in exchange for a few billion dollars in bribe money under the guise of ‘aid’. This has done nothing but destabilise Pakistan with the army fighting it’s own people and seeing Pakistani jawans being killed by American and NATO forces.
The new ‘democratic’ government like the dictatorship that preceded it has failed to deal with Pakistan’s problems by adopting the Western economic model under Capitalism. Pakistan will never be free and prosperous until it ends the foreign interference in its economic, domestic and foreign policy. Both military dictatorship and democracy have failed to achieve this.
The Islamic Shariah provides a comprehensive economic system that addresses the needs of a modern state. It is only the restoration of the Caliphate (Khilafah) that will ensure that the economic system is implemented and Pakistan’s resources are used for the entire Ummah and genuinely contribute towards a fair and prosperous society.