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 THE MUTUAL BENEFIT COUPON SYSTEM |
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July 2004
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Pakistan has projected an estimated budget of Rs. 904 Billion for the current fiscal year. Unfortunately by the conclusion of the fiscal year actual expenses will exceed Rupees 1,000 Billion. In fact, generation and collection of revenue inclusive of Tax Revenue (including income tax, sales tax, duties, surcharge etc.) and Non-Tax Revenue never surpasses the mark of Rupees 400 Billion. The annual average budget deficit for last five years was not less than Rs. 300 billion. The question arises then how does the government cover this shortfall. |
| Government has the following budgetary and non-budgetary supports available to balance this deficit: |
i. |
Prints money without having adequate reserves resulting in inflation and devaluation of currency. |
ii |
Prints prize bonds, treasury bonds and saving certificates and sale these
instruments through banks and other government agencies. These carry high interest/yield rates and increase public borrowings and increase in internal
debts. |
iii |
Buys foreign currency (USD) from open market to cover the shortfall in
foreign exchange of approximately 2 billion Dollars every year. Resulting
into devastating devaluation of Rupee against other currencies. According to a recent report issued by State Bank of Pakistan, Government of Pakistan
sustained a loss of Rs. 35 billion in buying USD from open market. This also increases the foreign debts. |
iv |
Borrows fresh loans from JR's like IMF, ADB, World Bank etc. It is claimed that interest rates are very competitive nevertheless these loans and interest thereon has to be paid, consequently external debt increases every year. |
v |
Borrows from banking system and hardly pays back. These debts increase every year, as government is unable to even pay interest on the borrowings and reschedule these loans accordingly. In 2003-04 such borrowings
amounted to Rs. 54 billion against the target of Rs. 15 billion (for the whole year). |
vi |
Government controls the prices of vital commodities like petrol,
electricity etc. and services. To reduce the budget deficit, increases price of such commodities, which adversely affect the cost of goods produced or
imported in Pakistan. This year budget was presented in June and in next
month i.e. July gas charges has been increased. Such devastating rise in prices has worse impact on economic activities and increases input cost manifold.
Resulting into higher cost of merchandize for domestic consumption and
international market as well. This also widens the trade gap between imports and exports, which is currently estimated at 2.5 billion Dollars. |
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