There was no surprise when the opposition asked the government to present a new budget after withdrawing the document, which it believed was dictated by the International Monetary Fund (IMF). However, it was shocking when former Finance Minister Asad Umar found fault with the budget of his own government in the National Assembly.
It was a rare occasion in Pakistan, where top leaders of political parties make decisions and all ministers and legislators attempt to defend them blindly, even if they make wrong choices. However, Asad Umar has set a new example in the country by speaking his mind in front of the top leadership of his party. Opposing a decision of the government of his own party to increase taxes on items of daily use, he called for an investigation into a constant increase in sugar prices. Taking part in the debate on the budget in the National Assembly, Asad Umar, who was removed from the post of the finance minister weeks before the presentation of the budget and in the middle of talks with the International Monetary Fund (IMF), asked the government to reconsider the decision to increase tax on sugar, ghee and cooking oil and impose the Federal Excise Duty (FED) on small cars. “It is inappropriate to increase tax on sugar as its prices are already soaring. An investigation should be held to ascertain the cause of its price hike,” he demanded.
Asad Umar, who is presently heading the house committee on finance, said the turnover tax should not be imposed at least on new investments for five years. He also proposed withdrawal of the Federal Excise Duty on small cars to provide benefit to the middle class. He recommended that there should be a further increase of 10 to 15pc in pension and advised the government to either withdraw the gas infrastructure development cess on fertilisers or make arrangements to recover it from the owners of factories, who were collecting it from farmers, but not depositing it to the government’s kitty due to litigation on the issue.
He also disclosed some of details of his talks with the IMF after he claimed to have persuaded the international lending agency to soften terms of the loan package for the people of Pakistan. He said there were five main factors — electricity prices, gas prices, tax rates, policy rates of the State Bank of Pakistan (SBP) and rupee devaluation — which were discussed during negotiations with the IMF before his “resignation” from the cabinet. He said the IMF wanted an increase of 50pc and 94pc in the prices of electricity and gas, respectively. However, he said, the National Electric Power Regulatory Authority had recommended an 11pc increase in the electricity price, saying there might be three to four per cent further increase in it. He claimed that it took him four months to make the IMF agree to one-fourth of the 94pc suggested increase in the gas price. He said he was happy to see that the SBP governor had already announced that there would be “flexible exchange rate” in the country, instead of “free float.” According to him, the IMF wanted the government to increase the policy interest rate from 9pc to 15pc. Similarly, the IMF put a condition that the tax-to-GDP ratio be brought to 13.2pc, which the government now intends to bring to 12.6pc.
It is obvious the government will not make changes to its budget on the recommendation of its former finance minister. His demand that the sugar industry and beneficiaries of its rising prices needed to be investigated will also fall on deaf ears. There is no doubt the tax on sugar would fuel further price hikes. In Pakistan, the leadership of the three large political parties — the PML-N, PPP and PTI — have all heavily invested in sugar mills. From Asif Zardari and Nawaz Sharif to Jehangir Khan Tareen, there are many who derive their strength and clout from sugar. Experts say it is the sector that no government can reform to the point where in some places its interests can lead to a ban on the use of unrefined sugar, or gur. Asad Umar is right when he says the sugar sector needs to be investigated. But who will carry out the investigation? Its interests know no party, and have a special place in the power politics of Pakistan. Sugar is where state and capital are fused so tightly that no investigation by any arm of the state is likely to be able to advance.
Analysts fear the new budget would further squeeze the common man economically. Domestic consumers are set to face up to 200pc hike in gas prices from July 1, mainly due to the rupee depreciation against the dollar. The government has already increased gas prices by up to 143pc during the ongoing financial year. The government is also all set to increase electricity tariff by Rs1.5 per unit with a financial impact of Rs175-180 billion, as under a commitment with the IMF, the full cost of power generation has to be recovered from the consumers.
It is clear a new wave of inflation and rising prices will hit the common people after the start of the new fiscal year on July 1. More dissenting voices will grow of legislators of the ruling party, who would find it hard to face their voters. Resentment among the people will also grow in coming days. The opposition is ready to exploit the situation. It will attempt to make the people take to the streets for political and personal gains.