ISLAMABAD, June 20: Speakers at a seminar on Friday called for urgent steps to free resources for poverty alleviation, expanding tax base, enhancing production capacity and devising a self-reliant growth strategy.

Speaking at a post-budget seminar organised by Islamabad Cultural Forum, the speakers also called for working out a debt retirement strategy and making serious attempts to bridge the gap between the rich and the poor.

Dr M. Irfan said the economic scenario at the time of budget preparation was depressing. Galloping inflation of food, fuel and other relevant commodities along with shortages of staple food and other goods have a telling effect on the life of the common man.

“Similarly, if we look at the macro-economic indicators like current and internal imbalances, the budget along with double digit inflation, it reflects a generalised atmosphere of anxiety, depression and the resulting despondency among the masses.”

He said during the past seven years, policymakers opted for domestic demand escalation through consumer financing wherein automobile industry was patronised, ignoring the attendant costs in terms of environmental degradation, conspicuous consumption as well as rise in the import bills.

He said similarly over $15 billion of the FDI of this period was directed mostly to telecommunications and financial sectors, wherein less than two per cent of FDI went to largescale manufacturing, ignoring the ramification of balance of payment.

He termed plan to target the poor through Nadra’s database for disbursement of cash subsidy flawed.

He said inflation had taken its roots over the last two to three years.

He said the target of 12 per cent inflation for the next fiscal year appeared to be ambitious. Withdrawal of subsidies will have an inflationary effect, which would be further compounded by increase in the General Sales Tax (GST).

He said there were important under-taxed sectors like stock exchange and real estate. He said governance and transparency were needed to ruthlessly prune both the current and development expenditures to free resources for poverty alleviation.

Dr Irfan said the PSDP rather than having over 2,000 projects could have focused on fewer high priority and quick-yielding projects to increase water and energy resources, food production and improvement of human resource development. He said a credible monitoring mechanism was also needed.

Dr Noor Fatima said drastic cut in subsidy on food, fuel, electricity and fertilisers would most hurt the poor already pressed in price-hike, inflation and food shortages. She said the rationale behind the decision was an attempt to prune fiscal deficit from seven per cent to 4.7 per cent, whereas it was a well-known fact that international donors had been demanding abolition of subsidies for a long time.

She pointed out that the IMF had set an impossible conditionality to bring the deficit down to 4.2 per cent, which would allow the World Bank loan of $500 million for balance of payment support.

Speaking on the new taxes and implications, she said taxes on developers and contractors would bring burden which would easily be passed on to the end consumers.

Heavy taxes on manufacturers will raise cost of inputs and will affect the competitiveness of export.

She said the budget proposed allocation of Rs34 billion for cash support programme to protect vulnerable groups from price- hike. “How will it help a family which will get Rs200 per head per month for a family of five. This is not even enough for basic food needs,” she remarked.

She pointed out that 60 per cent of the budget outlay was allocated to debt servicing and other government expenditure whereas allocation for poor was only 1.7 per cent of the total budget outlay. She said lenders offered credit, because it was profitable for them and sometimes got kickbacks in their financial projects and loans.

She said it was high time the economic managers chose economic priority for debt retirement strategy. “If debt is sustained, there will be lesser chances for us to get out of vicious circle of debt trap,” she observed.