ts are being cast once again on the impregnability and professionalism of our security forces that failed to anticipate or repel the May 02 US commando Operation Geronimo in Abbotabad, 100 kilometers inside our territory, and the attack by militants on the PNS Mehran base in Karachi 20 days later. The US has manifested unambiguously the extent of distrust and disdain in which it holds our intelligence services and armed forces that have been their comrades-in-arms for the last decade and how little its administration cares for the sensitivities and dignity of the Pakistani people. The combat preparedness and capacity of our combined elite units to protect their valuable assets stands exposed.
Another bombshell called the budget will soon be dropped on the hapless public that should be well advised to keep their seatbelts fastened. We have not been able to control the suicide attacks despite mobilising tens of thousands of our troops and losing 35,000 lives or the faltering economy despite accumulating billons in debt. The whole world has been ringing the loudest alarm bells crying hoarse about terrorists within our ranks. The IMF has been squeezing our money managers demanding financial discipline and to put a stop to corruption. But we like to take bad news with sugar coating and wait for divine help without helping ourselves with finding the facts and dealing with them, thus becoming a pariah of the world.
Our national budget is prepared each year with unrealistic revenue targets that are not achievable without capacity building and expenditures are incurred outside of budgetary provisions. Budget is a simple exercise in which the income and the expenditure are worked out just like in a household, industry or business. If the anticipated expenditure exceeds the income, the budget has to be balanced either by securing grants from friendly governments or by borrowing the deficit amount. Any lender will be happy to extend credit if it is satisfied that the borrower has the capacity to repay the capital together with interest accrued. So long as the client utilises the available funds productively and generates additional revenue to a level it is able to return to the lender the principal amount and also absorb the interest costs. If the provisions of the budget both under the heads of income and expenditure are not adhered to or in case of excessive non-productive spending, the deficit will mount and the client defaults. The lender allows a grace period after which further disbursement of funds is blocked.
The national income is generated mainly from collecting taxes. Any deficit is financed by national saving schemes, floating various schemes to attract funds from the public, internal borrowing from local banks or externally from international financial institutions (IFI) such as World Bank, Asian Development Bank or the Islamic Development Bank. We entered into an agreement with the IMF that provided us budgetary support subject to the implementation of tax reforms to raise higher revenues and to cut down on subsidies. Since we have not been able to achieve our projected revenue targets, implement the tax reforms or to cut subsidies to the desired level, the IMF has suspended further inflow of funds until the agreed reforms are implemented. Further, a certificate of good behaviour is not forthcoming that has closed the doors of the IFIs for any further borrowing.
To meet the gap, the government borrowed heavily from local banks gobbling 68 percent of their spread leaving a balance of 22 percent for the private sector and later turned to the State Bank to print billions worth of currency notes to meet their insatiable appetite that has resulted in double digit inflation. GDP has grown at 2.5 percent (that is 6-8 percent in the region), circular debt of power companies has been unmanageable, domestic and foreign direct investments are at minimal and the debt has risen to 11 trillion. The repayment and interest cost alone are in excess of the allocation for defence. The only positive indicator is the remittances that have kept the reserves at a decent level of over $17 billion.
These are extraordinary problems that need extraordinary solutions. If the rulers understand the gravity of the situation, they certainly do not show it. The Finance Minister has indicated a cut in the PSDP that will slow down economic growth (projected at 4.5 percent for 2011-12) and increase unemployment. Like the fight against militancy, the economic recovery cannot be achieved without the confidence, active participation and cooperation of the people, for which the government has to put their faith in the people by telling them the truth. The first announcement that the British Prime Minister made on assuming office was to cut the perks of the members of parliament, freeze salaries and increase value-added tax from 16 percent to 18 percent, in addition to various other economic reforms. The British government strictly enforced this order and their public fully cooperated that paid dividends within a year.
Likewise, our austerity has to begin from the top by reducing drastically the budget allocation for the Presidency and Prime Minister Secretariat. We must reduce the number of parliamentarians unduly increased by General Musharraf by the stroke of a pen, cut down their salaries and welfare projects planned for this privileged class that has delivered very little. The assets of the parliamentarians, government employees and their immediate families must be re-assessed and taxed and examples must be made for false declarations. There should be no further exhibition of ostentation in government functions. Foreign tours must be reduced to an absolute minimum and the entourage should be restricted to less than 10. The judiciary must make expedient decisions on the high profile pending cases of corruption and terrorism without fear or favour or any interference from the executive. The FBR must be purged of high-level corrupt officers by instituting cases and awarding punishments. Harbouring or abetting the corrupt or the terrorist must be made a serious offence.
Non-visionary juggling of the figures in the budget will just be an exercise in futility and will push us further downhill. The people will pay taxes only if they are assured that they are applied uniformly to the rulers and the ruled, will be consumed exclusively for their welfare and not line the pockets of the collectors or spent on the joy rides of the high functionaries. Whether it is the armed forces, the civilians or the ordinary folk, we need to revolutionalise our mindset. If we fail, a bloody revolution may be knocking at our doors.
n The writer is an Engineer and an Entrepreneur.