WASHINGTON, June 5: The government is serious about introducing a new scheme for cash transfers to the poor in the next budget to enable them to buy food, says prominent economist Shahid Javed Burki.

Mr Burki, a former vice-president of the World Bank and now a senior scholar at Washingtons Woodrow Wilson Centre, told a seminar on Pakistans economy that the new budget might include a series of reliefs for the poor hit hard by the current food and energy crisis.

The budget, he said, might also propose new public works programmes both in urban and rural areas for creating new employment opportunities.

Mr Burki said these two measures would be the main features of the new budget, and noted that such programmes have helped improve economies in other countries as well.

The government, he said, was also trying to “tax the rich a bit more” and the new budget might include measures aimed at achieving this target.

Mr Burki, who recently returned from a seven-week working visit to Pakistan, said a group of experts had advised the new government to introduce a capital gain tax and to re-impose the wealth tax.There’s also a proposal for a new tax on the corporate sector, he added.

“In the new budget, we may see both reliefs for the poor and higher taxes on the rich,” he said.

Mr Burki warned that the high-growth period that started soon after Pakistan joined the US-led war on terrorism was now coming to an end and the country was “plunging into very, very hard times.”

He noted that during the past several years, economic growth came from sectors that did not help the poor.

Consequently, he said, the poverty had increased and income disparity had expanded.

Mr Burki noted that the country now faced a very large fiscal deficit which, according to his estimate, was close to 7.5 per cent of the GDP while former finance minister Ishaq Dar put it close to 9 per cent.

The trade deficit, he said, was also close to 7.5 to 8 per cent of the GDP and was “mushrooming” while the balance of payment deficit also stood at 4 to 4.5 per cent.

Pakistan, he said, could sustain a fiscal deficit of up to five per cent but anything more than that could have disastrous consequences.

Ejaz Nabi, a senior World Bank economist, told the seminar that the current food and energy crises had combined to deal “a massive external shock” to the Pakistani economy.

“There are no soft landings,” he warned and appealed for a “massive induction” of external finances “or the country’s resources will disappear”.

In situations like this, Mr Nabi noted, governments usually resorted to major cuts in expenditures on health and education, which had a long-term negative impact.Mr Burki said that while the food crisis had had a negative impact on Pakistan, it also reflected “a paradigm shift” in favour of agriculture and in the long run the country could benefit from it.

He advised the government to devise policies that protected the poor but also benefited the agricultural sector.

Mr Burki suggested several short- and long-term measures for dealing with the current economic crisis which included taking advantage of the opportunities offered by world economies, maintaining micro-economic stability and high rates of savings and investments, allowing the market to allocate resources and capable governance.

He also opposed offering subsidies and warned the new Pakistani rulers not to use the government as “the last resort employer”.

Mr Burki also advised against using price control to curb inflation and urged the government to let the money depreciate under market pressures.