PTI Press Release – Post Budget Briefing
PTI Spokesperson has termed the annual budget exercise meaningless on the basis of the performance statistics released by the Government yesterday. The government has presented a budget each year and then proceeded to completely ignore it and end the year with no semblance to the original budget presented. Starting the year with a budget that set a target of 4.7% of GDP as the fiscal deficit, by its own admission will end the year with a budget deficit of almost 7% (including circular debt) and which in reality will probably end up close to 8%. This massive deficit is not only devouring almost all available bank debt but is also resulting in heavy monetization of the deficit through recourse to huge borrowing from the state bank of Pakistan. These actions are directly leading to the misery of the citizens and businesses of the country. The heavy fiscal deficits and their monetization on the one hand are stoking inflation making life difficult for the citizens of the country, particularly the poor and vulnerable. On the other hand by crowding out the private sector borrowing and with the increasing energy crises starving industry and business of gas and electricity, investment has collapsed to its lowest level in the last fifty years of the country. This means that the economic growth seen by the country in the last four years, which is the lowest in the last fifty years for any four year period, is set to continue at an anemic level for the next few years unless fundamental reform decisions are taken. The budget presented by the government does not address any of the fundamental structural problems being faced by the country. There is nothing substantive in it which deals with the high rate of inflation, the increasing unemployment, the low savings and investment rates, the inadequate and unfair revenue base, the massive losses in the public sector enterprises, the huge unproductive expenditure of the government, the low investment in the welfare of the citizens of the country or making Pakistan more competitive globally to spur exports. It is also like the previous years a budget which is dead on arrival and grossly wrong in estimating the fiscal deficit. For example the 250 billion rupees, and growing, of overdue payables to the IPP’s are not accounted for anywhere in the budget. We are likely to end next year with another deficit exceeding 8% of the GDP and the economy sunk further in a debt trap. The budget reflects the same lack of vision and political will that has characterized the last four years and which in this period has left Pakistan behind almost all other developing economies in the pursuit of development and welfare of its citizens.
Facts highlighted in the briefing are presented below: Economic performance of the current government - Per capita debt doubled – reaching Rs.70,000 (per person) in the last 5 years
- Inflation (CPI) reached a high of 21% in FY 2009
- GDP growth declined to 3.7% in FY 2012
- Private investment declined to 7.9% of GDP in FY 2012 (from a high of 15.7% in FY 2006)
- Inflation and GDP growth moving in opposite directions – leading to stagflation
- Pakistan’s economy performing worse than Sub-Saharan Africa (known as the poorest region in the world)
Budget 2012-13 fails to provide solutions to revamp the economy - In FY 2012, the current expenditure to be increased to Rs.2.5 Billion and development expenditure to be reduced to Rs. 397 Million
- Approximately 64% of net revenues to be paid as interest payments in FY 2012
- Fiscal deficit as a percentage of GDP to be increased from 6% in FY 2011 to 8.4% in FY 2012
- This fiscal deficit to be financed mainly through bank borrowing worth Rs. 1 Trillion (leading to crowding out of private sector) and printing money worth Rs. 500 Billion (leading to further inflation)
PTI estimate in comparison to Budget 2012-13 - Non-tax revenue is budgeted to be Rs. 658 Billion in FY 2012 - PTI estimate Rs. 450 Billion
- Current expenditure budgeted to be Rs.2072 Billion in FY 2012 – PTI estimate Rs.2758 Billion
- Subsidies budgeted at Rs. 166 Billion – PTI estimate Rs. 325 Billion
- Consolidated fiscal deficit budgeted at Rs. 851 Billion in FY 2012 – PTI estimate Rs. 1,740 Billion
Meaningless Budget exercise as the Government continues to miss targets by a wide margin - The cumulative deficit of the Government in the last 4 years has been 61% greater than what was budgeted
- This despite the fact that in the last 4 years Government reduced its development expenditure by PKR 450 Billion v/s what was originally budgeted
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