OVER A COFFEE : Budget 2013: saving a house on fire — Dr Haider Shah
The budget this year was precooked for the new government. We can, therefore, take a lenient view of the fact that it did not have revolutionary paradigm shift messages
When a plan is quantified it is known as a budget. The federal budget is out now and a careful reading of the budgetary documents can reveal what the real priorities of the new government are. If some categorisation is done, I can identify four main signals emerging out of the budget. One, it has targeted the energy issue by retiring circular debt, which is one of the causes of load shedding. Second, it has not attempted major taxation overhaul. When economic revival is important, squeezing the hen that lays golden eggs in order to get all the eggs in one go is a dangerous policy prescription. However, a gradual and steady increase in the tax-to-GDP ratio is also important as a medium- to long-term policy target. Third, many symbolic steps have been taken to generate the right kind of messages. For instance, discretionary and secret funds have been abolished and austerity measures introduced. Fourth, faced with a credit crunch situation, the government seems unable to implement its election pledges that require heavy investments and has, therefore, resorted to only a few symbolic steps like ‘Qarz-e-Hasna’ and laptop schemes. In short, the budget seems to be a desperate attempt at saving the existing abode from a fire rather than building a new palatial house.
Certain personalities in the media come up with strange stories. One particular story that has been churned out incessantly over the last few years is about the cost of the war on terror. A figure, depending on the wild imagination of certain babus (officials) in ministries, ranging from $ 80 to 125 billion is quoted to quantify the cost of the war of terror to Pakistan. This reminds me of a personal experience of how these figures are generated. In the heyday of General Pervez Musharraf’s ‘revolution’, a very pious chief secretary held a meeting about eradication of smuggled goods markets outside Peshawar. I was also present in the meeting and felt amused at the sweeping generalisations of a bureaucrat who had spent most of his time teaching Holy Scriptures in a government training institute. I was entrusted with the task of reporting the total worth of smuggled goods in all Bara markets of Khyber Pakhtunkhwa. I, in turn, handed over the task to a few customs inspectors. Using their poetic imagination they came up with some figures, which were all added up and the final figure was communicated to the pious chief secretary. I could not help smiling when in the evening PTV news I heard the newscaster referring to the same figure that he claimed to have worked out after robust research conducted by the government.
How the anti-smuggling operation was later conducted is a separate story that I might share over a coffee some other time. But this anecdotal story should help us understand how this imaginary figure of the cost of the war on terror must have been worked out. Apart from the authenticity of these figures there is one more problem that plagues the whole conversation about this topic. When a media personality quotes the imaginary figure of the cost of the war on terror, there is an underlying assumption that we enjoy full liberty to make any choice about our involvement in the war on terror. The assumption is that we could have easily turned our eyes away and as a result we would have saved $ 125 billion. The anchors and naïve commentators need to learn about the concept of ‘opportunity cost’ as nothing comes for free in this world. In 2001 Pakistan was faced with two choices. Either join the international community in a war that had been sanctioned by the UN or say no to offering any support. If instead of cooperating with the international community Pakistan had said no, there would have been far deadlier consequences. As Pakistan’s territory was used by the insurgents to stage attacks on UN-mandated forces in Afghanistan, Pakistan would have been declared a pariah state and the NATO planes and drones would have attacked the country. Apart from physical destruction, Pakistan would have seen its economy collapsing completely due to international sanctions imposed by the major economies of the world. Eighty-five percent of our exports are made to the US, EU and Gulf countries. Our economy cannot, therefore, afford a serious jolt from these countries. Apart from these purely financial losses, the social losses would have been even more pronounced. Power would have passed on to militant groups as we faced the NATO forces head on. The price of not cooperating with the NATO forces would have been, in short, much higher than the cost of becoming a part of the international community.
The budget this year was precooked for the new government. We can, therefore, take a lenient view of the fact that it did not have revolutionary paradigm shift messages. There is a pressing need to rationalise our defence spending, which has remained about 25 percent of total expenditure. This in turn is only possible if we live in peace with our neighbours and hence minimise threat perceptions from imagined enemies. Education and health can only get significantly higher shares if we make worthwhile savings in military spending. There is a historic opportunity to realise the dream of a paradigm shift. Nawaz Sharif, enjoying the trust of the Pakistani electorate and of the governments of neighbouring countries, is best positioned to play this historic role.
The writer teaches public policy in the UK and is the founding member of the Rationalist Society of Pakistan. He can be reached at firstname.lastname@example.org