Budget lies the government tells you every year

Published: June 12, 2011
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So, it’s the budget season again: the country goes through the motions of presenting budgets at the Federal and Provincial levels. As always there are tons of discussions over the types of budgets that should be presented. Each year like clockwork we see the same faces pop up on TV screens and newspapers giving the same old opinions on what should be and what should not be.

But eventually the same thing happens.

Absolutely nothing.

It is in that spirit that I am have decided to write what the government does not tell the people and what the pundits conveniently miss out.

1. We do not have enough money:A country like Pakistan should not be growing at 2.4 % per annum, in order to sustain ourselves we need to be growing at over 6% per annum. The reason for this is simple; our population growth rate is actually higher than the rate at which our GDP is growing. So in simple terms that means, the rate at which we are making money as a nation is slower than the rate at which our people are growing. That means things are not going to get better, instead our best bet is that they will remain the same or the worst case scenario is that they will get worse then they already are.

2. No such thing as a people-friendly budget: When the government says they are imposing new taxes, they mean to say that they are putting up more indirect taxation. The thing about the indirect taxation is that it does not differentiate between the rich and the poor like the income and wealth tax does. And why do we need the indirect taxation? Well, because our collections from the income taxes are small (as hardly anyone pays them) that we rely on indirect taxes like the sales tax to fill government coffers. This also means that if the taxes go up, the price of everything will go up as well, which will mean inflation is going to increase. So regardless of how many times any political party says that budget should ‘bring relief for the people‘, they are lying – it is simply not possible.

3. Printing more money is no solution: As the government does not have money to begin with, it tends to borrow money from the private banks and paper money. Now, if you print money, the value of money goes down. That also means, the more money you print, the more the value of that money goes down. So if you could get 10 items for Rs100, after printing tons of money, you will only get six things for Rs100 because the value of money has gone down. Effectively till the time we keep printing money the inflation will keep rising.

4. Inflation is good for an economy. No one ever says that out loud, but economic facts are that inflation is good for an economy, it shows that economy is growing, thing is 14% inflation is not good for an economy. It should be around 3 to 4% as that is manageable. So based on this, any political party that says that we will get rid of inflation is lying to you as it is simply not possible.

5. The vicious cycle of petrol prices: The price of oil is going to rise to at least $130 by the end of the year, while our current estimations are made at about $100 to $110. So, when push comes to shove, the prices of oil will shoot up and in order to keep public calm, the government will have to provide a hefty subsidy. Guess how they are going to give this subsidy? Well, they are going to print more money that will lead to inflation. So either way, petrol is going to be more expensive and things will be more expensive courtesy international oil prices. So if you hear a politician complaining about this, you know he is lying to you.

6. Bosses hire people not budgets: The government of Punjab’s budget is supposed to create tons of jobs, but the government cannot just “create jobs”; they are created through business activities so they can be sustained. The government would need to get investors to invest in businesses that will in turn increase demand for new workers and create long term, sustained jobs. Also just to remind you, how government tries to create jobs is adding more people in to organizations that are already losing money, public money to be exact like the railways and PIA. Now as Pakistani’s why would we want to throw away more money on losing corporations?

7. No such thing as a tax-free budget: When the government says that they presented a tax free budget, that is another lie. The budget is nothing more than a plan for spending money over the next 12 months, if need be that plan can be changed. The taxes can be raised or added at a later stage. Also, the amount of different types of taxes that are in existence right now, there is literally hardly a new tax that can be imposed. Taxes themselves are not the issue; it is collection that is the problem.

8. Aid money is good for us: Regardless of what certain politicians might have to say about aid, it is crucial to make up for the money we don’t have. It’s simply going to harm you. But what is an issue is reliance on aid. Long term reliance on aid is a genuinely bad thing as it discourages indigenous economic development. This differentiation is often ignored while discussions on aid are happening.

9. Development money that is never spent: By far the biggest lie the government tells each year is the amount allocated to development. This is a lie because if you look at the records in the last 3 years, the development budget is normally slashed by up to 40% over the course of the year. So what the government declares to be the development budget is never actually spent on development, instead more than half of it goes towards that ‘plans’ for the people.

Why don’t our politicians just lay it all out for the public to see?

They should just be honest with us, people might protest or shout but we can only work on making things better if we exactly know what the problem is!

Adnan.rasool

Adnan Khalid Rasool

Currently the Deputy Executive Director Center for Enterprise, Trade and Development, Adnan is also a political analyst working mainly on electoral politics and political campaign management. He tweets at @adnanrasool

The views expressed by the writer and the reader comments do not necessarily reflect the views and policies of The Express Tribune.