The coalition government is reported to have approved a Public Sector Development Programme of Rs541 billion for fiscal 2009 that is 11.2 per cent higher than the current year’s allocation.

The quality of the programme would come under discussion after the presentation of the budget in the National Assembly when the details of allocations are made public.

Apparently, the PSDP size looks rather unrealistically large. Is this not too ambitious a target when during the current year despite record borrowing from the central bank, throwing the Fiscal Responsibility Act to winds and letting the fiscal deficit touch the dangerously high mark of 9.5 per cent of the GDP, under an authoritarian regime for a better part, the PSDP had to be curtailed?

The key question is: Where will the money come from to finance the development programme keeping in view the financial constraints and pressures for sharp readjustments to attain sustainable fiscal balance gone haywire?

Add to this, the signs of economic slow down and situation becomes even more challenging. It is hard to imagine an economy that failed to mobilise enough resources in a period of buoyancy, generating more internally when growth rate has lost the momentum. During all through years of high GDP growth tax to GDP ratio was under 10 per cent. It was nine per cent this fiscal.

Beyond gestures of sympathy amounting to a few million dollars, the prospects of getting serious external budgetary support are not bright either in the immediate future. In a difficult political transition, the government has yet to stabilise itself. It may need some time to earn the confidence of international donors and investors as responsible stable administration capable to deliver, before getting the backing it needs from them.

Besides, the size of foreign capital inflow is set by the pace of domestic economic growth unless global politics drives economics as it did after 9/11. At this point of time, it is the domestic compulsions that are shaping national events.

The economic team was understandably busy giving final touches to the budget proposals and was not able to make itself available to grant formal comments at this juncture. Shaukat Tareen, Convener of the Economic Advisory Committee (EAC) could not be reached for his comments. Salim Reza, member EAC, who also heads Pakistan Business Council, a think tank of the private sector told Dawn over phone that the government is actively considering a number of proposals to generate additional resources both through scaling down its expenditure and broadening the tax net.

”The government is pondering over the restructuring of direct broad based subsidies to make them targeted and effective. There is no need for a cash-starved government to pamper segments and sectors that can sustain themselves”.

“There are suggestions of broadening the tax net under study as well. However, with no major change in the tax regime, even if the government succeeds in improving the tax administration to check tax evasion it can generate more resources”, he said.

Zubyr Soomro, an ex-banker who headed Overseas Investors chamber of Commerce and Industry and American Business Council focused his comments on the need for increased development spending to address the structural issues particularly those related to physical and social infrastructure. He advocated public private partnership to share the burden of the development cost and improve efficiency.

”Undoubtedly we have to address the infrastructure requirements which are now getting in the way of growth. However, given the considerable rise in the international prices of food and oil and given the massive size of our poor population, we will have to prioritise spending carefully.”

“Government spending on infrastructure is rarely efficient and we have seen little if any accountability on the quality and timeliness of projects they undertake. Taking public/private partnership approach to funding these needs would make more sense as it would not only share out the load but improve oversight and thus project quality.”

Soomro supported pro-poor expenditure but highlighted the need to make the government trim and slim to avoid wastage of valuable resources. “Workable and effective spending on poor is critical and should receive the highest priority in our budget. To make room for this, the government should take the lead by a substantial cut in its current expenditures. We simply can not afford the luxury of an excessively large government”, he insisted.

A very comprehensive detailed report of Social Policy and Development Centre on fiscal policy choices in the budget 08-09 was launched early last week by Dr Hafiz Pasha that claimed to have presented a civil society perspective on the budget making exercise. The report starts with the current economic situation and concludes by presenting various social safety net options.

The report also presents what it calls “contours of tax policy for improved resource mobilisation and redistribution”.

These sets of workable options offered in the SPDC report indicate “the most suitable economic coarse to achieve sustainable inclusive development goals. The current sorry state of the economy after the bonanza following 9/11, show how rulers in Pakistan with the help of technocrats compromised the long-term economic interests of the country for their short-term petty interest of amassing wealth privately at the cost of the well being of the majority”, commented an economists requesting anonymity.

“One wonders what made technocrats so concerned about economic hardships of masses. They have been in and out of the government irrespective of its composition and belonged to neo liberal, pro-World Bank, IMF school of thought that favoured structural adjustment programmes all through later eighties and nineties. These programmes required adjustments that burdened vulnerable segments of population disproportionately”, commented another lady economist not so big a fan of the World Bank recipes of economic revival.

”All said, those with ability to pay need to be sensitised of agonising life of dispossessed classes to persuade them to be more responsible tax payers and those with resources need to be persuaded to invest in the real sector for achieving growth and development”, a senior official concluded over telephone from Islamabad.