It must be hard for the ministry of finance which lost its captain Ishaque Dar and got a new finance minister, Naveed Qamar on Friday last and changed secretaries four times over the past one year to produce a budget that reconciles conflicting interests while ensuring that the economy does not lose the growth momentum any further.

This is a big challenge in an exceptionally difficult economic situation marked by galloping inflation, low resource mobilisation, serious current and external account imbalances, faltering agriculture and manufacturing growth and crippling poverty.

“The headless ministry lacks capacity to deliver. There is no strategy, no vision and no plan. It would be unrealistic to expect wonders from them, a senior economist who wished anonymity told Dawn from Islamabad before the new appointment.

The secretary, ministry of finance who assumed office two weeks back was not able to make himself available to comment on the situation of budget- making but some other senior members contacted in Islamabad insisted that the budget exercise that started as early as February is in its finalisation stages and the first budget of the elected government will be presented in the assembly at about the same time as before.

God willing, the budget will be presented in the assembly in the first half of the month of June around 10th, if you ask me for a date, a senior bureaucrat in the finance ministry told Dawn.

Without being specific, sources in the ministry of finance said that the current brief of the coalition government to budget makers is to prepare a progressive budget without busting the financial limits. We have been asked to chop discretionary expenditure to bring down the current account deficit to permissible level of around five per cent of the GDP from the current horrifically nine per cent high by the close of the next fiscal, said an officer involved in the exercise.

There are some mandatory heads of expenditures that cannot be touched such as debt payments, defence budget and compulsory administrative heads that includes salaries of the government employees. However, development expenditure is discretionary and can be adjusted, a senior officer explaining constrains of budget makers said.

The size of PSDP will be adjusted (cut) to contain the expenditure side of the budget. Normally, ongoing projects get the highest priority as opportunity cost of abandoning a project is considered to be too high. But new projects would only be approved after scrutiny and old projects that have not commenced will most probably be shelved altogether, our source in the ministry told Dawn.

Some experts felt that cutting corners will not be enough and new avenues of resource generation will have to be tapped. The tax base will have to be broadened by taxing certain services. Introduction of capital gains tax is on the cards. Reintroduction of regulatory duties on the import of non- essentials looks unavoidable to contain the excessive import bill and make up for the loss in custom collection, it was revealed.

The government will introduce some scheme to provide relief to the poverty stricken masses on the edge. The subsidy would, however, be targeted and not general. Different possible options, from food tickets to social security net, are being evaluated.

From what one gathered from talking to different sources in Islamabad, the budget 2008 will be projected as a realistic budget of an elected government as opposed to the populist budget 2007 of quasi-dictatorial regime that led to worsening of macro economic indicators. The focus of the budget will be to facilitate the commodity producing sectors. Incentives will be provided to domestic savers by improving the returns on national saving schemes to reduce dependence of the government on the State Bank of Pakistan for resource gap.

The economic cost of irresponsible financial management for the economy would be prohibitive impairing its capacity to qualify for new loans or market GDRs and bonds in the international market. A reputable credit agency Standard & Poor’s cut the rating of Pakistan last week again citing increasing pressure from expanding fiscal and external imbalance against a volatile political setting.

Pakistanis are hearty spenders with low propensity to save. However, the negative rate of return offered on savings by both private banks and the government on its schemes has discouraged people further already under pressure because of high rate of inflation depressing the saving to GDP ratio further.

The tight financial position of the government will not allow it the liberty of providing subsidies liberally to buy support of the influential economic agents. In fact, the government might decide to do away with subsidies to special interests to create fiscal space to introduce limited subsidy to the poorest of the poor to gain some political mileage.

The private sector has been offered a lollipop by creating an economic advisory council (EAC) that accommodates representatives of the private sector and big business besides PPP loyalists and a few appointees of the President’s camp. Naveed Qamar is the chairman and Shaukat Tareen has been declared its convener. The committee members include Salman Farooqui, Shehnaz Wazir Ali of PPP, Bashir Ali Mohammad, Mian Tariq Saigol, Faruq Rehmatullah, and Saleem Reza as private sector representatives and Hina Rabbani Khar and Saqib Sheerani from President’s camp and also the secretary finance Farrukh Qayum.

The constitution of the committee is perceived as a political move of the Gilani government to give sense of participation to influential actors who will not get much from budget. The composition of the committee that excluded economists of standing such as S M Naseem, on one extreme to Shahid Javed Burki on the other, amply demonstrate the intentions of the government that at this point it is not particularly interested in building the capacity of the economic team to provide an alternative economic roadmap of development.

Dr Hafiz Pasha was not perturbed by the changes in the finance ministry hierarchy as in his view the ruling coalition is intact. Besides in the current situation, the options before the budget makers are limited. The economic programmes of the leading coalition partners are not much diverse. More importantly, to him, their leaders have convergence of view in their understanding of the current state of the economy. Dr Hafiz Pasha, an economist, who was also an advisor on finance in an earlier set-up, returned to the country recently after lapse of some seven years.

“ I do not see any major shift in the policy thrust except for more focus on improving the financial indicators of the economy by imposing regulatory duty on imports excluding essentials, slashing the size of the PSDP, moving away from State Bank for financial needs of the government, broadening of tax base by taxing income from services. I am not in favour of capital gain tax on capital market as it could add to the nervousness of investors and could lead to exit of foreign portfolio investment from Pakistan but the capital gain tax need to be introduced in the real estate sector.”

Most analysts underplayed the exit of Ishaque Dar as the finance minister and argued that as long as the coalition government holds, the prospects of the economy regaining its growth momentum are bright.

Pakistan has a potential and the capability. It, however, lacks in the quality of leadership that holds myopic view. All you need is to get serious and build on the natural strength of the economy. If farmers on the other side of the border can get 65 maunds per acre against our 40 maunds in wheat and Ukeraine can push the yield to touch 100 maunds limit from land of similar to or inferior in quality, there is serious haemorrhage in commitment of planners, the quality of planning comes later.

Before anything else you need the will to bring about a change. When there is no will who cares for the ways, a seasoned planner with international exposure frustrated with the current crop of political leaders, said.