Nationwide Updates

► How to overcome economic crises

This is a good time for Pakistan’s new rulers to take some decisions that will not only heal the economy but also change some of its structures. Policymakers respond in two different ways to serious economic crises. Those who are bold use the opportunity to deal with the causes behind the crises since most of the time crises are produced by structural flaws in the economic system. It is best to identify the flaws and remove them from the system. This way the problems would not occur again. Those who are less bold apply bandages to the wounds that have appeared and hope that the underlying disease will not reappear again.  (Dawn)

► Toxic prescriptions in the Budget  

Our policy makers continue to come up with knee jerk amendments, in the Finance Bill, to overcome fiscal deficit, without adequate knowledge of history, understanding of ground realities and without thinking through the consequences of such changes. Four glaring examples of flawed proposals have came to light in the Finance Bill 2008-09 and subsequent pronouncements of the Finance Minister, (1) Withdrawal of 'no-question' protection provided on forex deposits of individuals in banks under the liberalisation of Forex Exchange Act; (2) Increasing the withholding tax on cash withdrawals from banks from 0.2 to 0.3 percent;.  (Business Recorder)

► A budget in midst of political turmoil 

This year’s budget, presented in the midst of political uncertainty, especially in the shadow of the lawyers-led long march, as well as in the absence of a unified visionary leadership and prepared with the help of a mixed bag of experts, could hardly be expected to overcome either the enormous economic challenges or meet the high hopes for change raised by the 18 February elections. The challenging task of preparing the current budget was shared by two former finance ministers Mr Ishaq Dar and Mr Naveed Qamar but, after the former resigned, it fell to the latter’s lot to finalise it.  (Dawn)

► New budget, macro-economic instability, poverty, wheat and energy crisis

The current fiscal year to end on the 30th of June is unique in many respects as it has experienced an unprecedented volatile political scene worsening further the economy already struggling to cope with both external and internal shocks. This is reflected in pressure on prices, widening twin gaps in external sector and budget, lackluster industrial and agricultural productivity leading to slackening growth tempo, stagnating domestic savings, bulging borrowing both - external and internal, worsening income inequalities, and crippling wheat-energy crisis to mention a few out of a big list of multiple economic woes.  (The News)

► Economic survey and constraints of budget makers  

Economic Survey (ES) released by the Federal Government on 10 June 08, one day prior to presenting the federal budget to the National Assembly depicted an all- round poor performance by economy during outgoing fiscal year for multiple reasons of political uncertainty, rising prices of food, petrol and raw materials in international market, high domestic demand of consumable items, expansionary fiscal policy and lack of visionary management of economy during past few years. This has certainly increased stakes for the newly elected government. It has a difficult job of not only containing the slide down in economy but it has also to regain lost growth momentum.  (The News)

► Oil price rise and implications for Pakistan

Pakistanis have been particularly vociferous in holding the government accountable for the oil price rise in recent months. Not surprisingly, the politicians have been embroiled in a blame game made all the more credible because of the fact that the country has been subjected to three different administrations during the past eight to ten months. Throw in a general election considered to be largely fair and free, and one has all the ingredients necessary to make accusations stick. The budget for the fiscal year 2006-07, prepared by the Shaukat Aiz government, failed to take any account of the possibility of a rise in the international price of oil.   (Business Recorder)

► Hopes rekindled 

The incentive and subsidy package for the agriculture sector proposed in the budget 2008-09 is expected to save the growers billions of rupees in input costs and boost farm output, say farmers from Punjab. “The package is most likely to arrest the spiking cost of production and improve farm production,” said AgriForum Pakistan chairman Ibrahim Mughal. The government has proposed in the budget to raise the subsidy on DAP fertilizer to Rs1000 per bag from Rs470, remove general sales tax (GST) on pesticides and fertilizer,   (Dawn)

► No incentive for industrialisation

The business and trade is unhappy over the two years’ exemption from capital gains tax on shares as “it gives a signal that nobody should suffer pains of industrialisation or take business risks’’, says a document issued by the apex trade body, the Federation of Pakistan Chambers of Commerce and Industry (PFCCI). ‘’If attractive returns are available on stock market’s non-productive portfolio investment, why should anyone take the trouble for setting up an industry and get involved in all sorts of hassles,’’? a senior business leader remarked on Thursday last at the FCCI meeting held to assess the impact of budgetary proposals.  (Dawn)

► The bewildered textile industry

THE budgetary proposals for the next financial year related to manufacturing in general and textiles in particular appear to have left the struggling textile industry pretty bewildered. The industry is specially concerned over what a knitwear exporter called complete blackout in the finance minister’s budget speech of the support being given to the value-added textile exporters in the form of R&D (research & development) allowance. It is very frustrating that the single most important policy measure R&D allowance helping the value-added knitwear.  (Dawn)

► WB asks govt to withdraw wheat subsidy

Nearly half of Pakistan’s 160 million people may soon be unable to buy food because of rising prices, warns the World Bank but in the same report it also advises Islamabad to withdraw subsidies on wheat, the country’s staple diet. The bank’s latest report on global development finance also warns that Pakistan’s slower growth outcomes will compress government revenues and make further consolidation more difficult. The policy makers will have less manoeuvrability to stave off potential effects of deterioration in the external environment.  (Dawn)