Budget 2020: Popular Misconceptions & Economic Reality
by: Hassan Akbarhttps://jinnah-institute.org/wp-content/uploads/2019/06/Budget-Blues.png
n what is being billed as Pakistan’s most austerity laden budget in decades, new taxation and fiscal retrenchment measures are set to herald a difficult era of economic contraction. The government’s economic team, missing a full time finance minister to steer the economy through this turbulent period, has privileged macroeconomic stabilization under an expected IMF bailout by sacrificing economic growth which in turn is expected to dive to a dismal 2.4 percent.
The burden of revenue generation is set to fall on salaried individuals. New income and indirect taxes have been levied in the budget amidst an ambitious 20 percent increase in the revenue target. A decrease in the minimum taxable income, the addition of four new income tax slabs, and a regressive tax incidence, up by 200 percent for middle income individuals, has added to the tax burden of the few citizens already in the tax net. With inflation set to cross the 13 percent mark after a decade on the back of a devalued rupee and increase in energy prices, the burden on lower and middle income households will rise exponentially.
The government has insisted that tough austerity measures are necessary to disrupt Pakistan’s slide towards bankruptcy. The onus for difficult economic conditions has been set squarely on the shoulders of the previous administration’s appetite for public and foreign debt. But this is only half the story. The PTI too has accumulated more debt in its first eight months than any previous government during the same period. Public and external debt has risen from Rs 29.88 trillion at the end of the PMLN’s tenure to Rs 35.09 trillion by end of March this year. The government’s indecision on an IMF programme and the subsequent uncertainty in markets has eroded confidence in the government and exacerbated macroeconomic indicators over the past ten months. The inability to balance the need for stabilization with an eye towards keeping growth on the charts is reflected in the budget.
Like the several IMF programmes before, the absence of a plan to eventually graduate from stabilization to growth is worrying. Equally concerning are mixed and contradictory policy announcements, especially on export oriented industries. While the government has announced reduction of duties on import of machinery and raw materials for the textile industry, the withdrawal of zero-rated exemptions on sales tax from five leading export industries including textiles, leather, carpets sports, and surgical goods will stifle exports. The zero rated facility for gas and electricity too has been withdrawn and will increase input prices. The only concession in the budget has been the government’s promise to refund sales tax on an automated facility. Pakistan’s limited exports will fall. The continuing slide of exports despite the devaluation in the rupee, indicates a fundamental lack of competitiveness in Pakistan’s exports.
The government has exempted customs duty on more than 1,650 raw materials and industrial inputs for the manufacturing industry, including the paper industry. But the decrease in customs duty is accompanied by an interest rate hike to over 12 percent denting private investments in new manufacturing units. The removal of the restriction on the purchase of property by non-filers has been removed in the budget, this comes as a boost for genuine buyers. But the simultaneous levy of capital gains tax on FBR rates irrespective of holding term of property and the rise in FED on cement will dent construction as investments in the property sector decreases.
The government’s policy for the next year is predicated on reducing aggregate demand in the economy. While the reduction in aggregate demand will result in a lower import bill, the impact on domestic production will be damaging in the long term. The disincentives built into the budget for export industries and the lack of significant incentives for private investors in the services and manufacturing sectors will skew economic outcomes making growth off-take even harder in the coming years.
Unfortunately, the austerity driven budget for the next year is not accompanied by any reform plans to restructure the economy – an essential step for recovering from stabilization and entering a growth phase. The only policy measures outlined in the budget have been limited to increasing the tax net through punitive measures. Instead of creating adequate incentives for self-selection into the tax net, the government’s planned measures for increasing the tax base are limited to ‘hunting down’ non-filers – a tried and tested method that has had little or no success before. The lack of a road map on restructuring loss making public sector enterprises, incentivizing industrial growth, improving the cost of doing business are missing.
While the government’s monetary and fiscal measures are adequate in their effort to contain the fiscal deficit and the current account deficit, these policy measures come at the expense of any growth momentum developed over the last five years. According to the World Economic Outlook report by the IMF, Pakistan will grow at a sluggish rate of 2.5 percent on average for the coming five years. The 2019 budget forecast is a reflection of that prediction. An overzealous pursuit of macroeconomic stabilization at the cost of even a modicum of growth will mean rising unemployment and poverty levels in Pakistan as the government struggles to meet pressures on public service delivery. The results of stabilization are already being felt and its impact will only grow more acute in the months to come.
Date: June 12, 2019
At Modernity’s Door
by: Fahd Humayunhttps://jinnah-institute.org/wp-content/uploads/2019/06/At-Modernitys-Door.png
Shortly before Eid, an android application for moon sighting was made available on Google Play. A calendar that can be accessed through Pakistan’s first official ‘moon-sighting’ website now indicates scientifically determined dates for major Islamic events.
The app and website kicked off a conversation about rituals and their symbolic currency in a country that still takes its cues from religious praxis. The Ruet-i-Hilal Committee’s monopoly over moon sighting is now subject to public and political debate. With it, is an age-old question: can tradition and modernity coexist in a state where both are singularly contested, and both view each other with suspicion?
There are two reasons why we don’t have a clear answer.
The first is a failure to establish clear parameters of what modernity means, and what it should look like for the median citizen who privileges faith, but also panders to conventional paradigms of consumerist progress. Today, Pakistanis are flocking to cities faster than any other country in South Asia. Yet one in eight urban dwellers lives below the poverty line, and one in 10 children in Lahore, Peshawar and Karachi remains out of school. This new cohort believes it is more modern than the previous generation, but does not benefit from opened-up choices in education, at work and among lifestyles critical to modernity and economic freedom.
The second reason is a public discourse that sacrifices critical inquiry at the altar of conjecture, analogy and myth. It was only seven years ago that a self-styled engineer burst onto Pakistan’s TV screens claiming to have invented a ‘water kit’ enabling cars to run on water. The then cabinet met thrice to discuss the water vehicle, while the media rushed in to celebrate a new national hero. All this took place while the inscription on Pakistan’s first Nobel laureate tombstone was being frenziedly edited on a district magistrate’s orders.
For a low-value agrarian economy that has struggled to sustain a clear narrative for modernity, or its place in national life, these contradictions should be unsurprising. Our yearning for progress often wrestles with political entrepreneurs with arbitrary notions of modernity. Scientists in elite universities in our bigger cities shy away from teaching evolution. Government-sponsored science textbooks are unscientific. Pakistan may be the seventh most vulnerable country to climate change, but only a few years ago, our then climate change minister blamed Indian power plants for a heatwave in Karachi.
Without a social systems framework to nest their aspirations in, Pakistanis today live in what they are told is a modern age, hyper-exposed to editorialised threats (ie fifth-generation warfare) and hybrid enemies brought to them on plasma TVs and Samsung smartphones. The nativisation of the telecom revolution has skirted around social class barriers, democratising cellular technology and therein the internet. Pakistan has 60 million 3G/4G users and some of the cheapest data prices in the world. CPEC will expedite these processes, with 800 kilometers of fibre-optic cable and expansions by China Mobile connecting more Pakistanis to the internet than ever before.
Hence, we find ourselves digitising a median citizen who is not experiencing education, social and political reform — processes that undergird wholesome national transformation. Pakistan has under 100 researchers per one million citizens and national expenditure per researcher is declining. Pilgrims outnumber taxpayers. Meanwhile, the siren of the smartphone has created a new medium for consumers who use conservatism as a marker of identity, and WhatsApp as a register of social expression.
Another challenge to modernity is from the public square itself. If the public square has been less than successful in segregating tradition from the notional importance of scientific inquiry, it is worth recognising the policy failures that have led to this. Gross spending on R&D is an important indicator of how much is being invested in the future of science. Pakistan’s is less than 0.3 per cent of GDP; India’s is 0.9pc. Weak patent enforcement offers low rewards for innovation and knowledge creation.
Too often we forget that home-grown visionary scientific leadership resulted in Pakistan’s international participation at the high table of global science and research, including at CERN. But the inconsistencies are glaring, in part because these achievements have not been situated in a coherent narrative of national progress. At home, technology is instrumentalised for coercive purposes rather than education. Last year, Pakistan was ranked 73 out of 100 (100 being the worst) in a global Internet Freedom Status index. So it makes sense why the sighting of the Ramazan and Shawwal moons instigates controversy. We may be a voracious primetime audience, but have yet to democratically negotiate modernity and the changes it ushers in.
Date: June 11, 2019
Who’s Afraid of Mr. Jinnah?
by: Fahd Humayunhttps://jinnah-institute.org/wp-content/uploads/2019/05/Whos-Afraid-of-Mr.png
India’s election is over, and the BJP has won in a landslide that is nothing short of historic. The Opposition has been delivered a crushing defeat, turfed out of its traditional home grounds.
In the years that follow, the actual result may be remembered less vividly than the road leading up to it. At one point during the campaign, a saffron-robed candidate fielded by the BJP from the state of Bhopal called Mahatama Gandhi’s killer a patriot. The candidate in question, Pragya Singh Thakur, is connected to the planning of multiple acts of terror targeting Muslims. In a separate anecdote, when told that Hindus had died along with Muslims in the 2007 Samjhauta Express blast that killed 43 Pakistanis, she did not flinch. “Chanay ke saath ghun bhi pista hai” (worms get ground with the gram), she said.
As India votes in five more years of nationalist hegemony, Ms Thakur is now poised to enter India’s Lok Sabha as a member of parliament.
Why do Pakistanis watch India’s election and its aftermath with a mixture of hope and trepidation? We watch, because, for many of us who have grown up on a diet of halfway democracy, India’s political marketplace has always been held up as emblematic of what-could-have-been. Of the two states that emerged from 1947, India, we were told, was nimbler and more adept in shaking off its colonial legacy’s worst excesses. It moved swiftly to forestall regionalism. It thought seriously about communitarianism, secularism, and constitutional development. Other than a brief spell from 1975 to 1977, constitutional freedoms for the most part were sacrosanct, even when organized fear raised its head in 1984, 1992 and 2002.
In contrast, we were the ones guilty of first turning religion, and later authoritarianism, into our social centrepieces. We thumbed our nose at the opportunity to strengthen our constitution, and our leaders, barring a few, swapped out nation-building for proselytizing. When the cold war finally came to Afghanistan, anxiety led us down perverse paths we should never have ventured down. So convinced were we of our status as an indispensable ally to an indispensable superpower that we failed to notice our growing insolvency.
India frequently accuses Pakistan of staring into a looking glass and choosing not to see a host of ignominies. It is true that hostility with India has indemnified the legacies of those who led the Pakistan movement. But even minus war, the centrality of Partition to the modern Pakistani identity has largely held up, cognitively reified since the 1980s by the fragility of the Indian Muslim experience.
Now, a party that has promised a Hindutva utopia will expand on its current majority. This is a party that has pledged to revise Articles 35-A and 370 of the Indian constitution, which give Jammu and Kashmir its special status. The prospect of its cancellation put the Valley through a fatal churn last year. A new 550-page report on torture, written by Kashmiri civil society meticulously identifies “at least 144 Indian armed forces camps (Army and paramilitary), 52 Police Station/Posts, 19 SOG camps, 15 JICs and 9 Ikhwan camps…where torture has been perpetrated on detainees.”
In South Asia, the violence produced by and within the Indian state actively conditions the image we consume in our newspapers and on our smartphones, and read about when its leaders use Pakistan as a pejorative, even as our own leaders rationalize the logic of dialogue. It is an India that runs on majoritarianism, makes obscene effigies of its founding fathers, and valorizes totalitarian repression in its only Muslim majority state.
Young Pakistanis who rightfully question their state’s mismanagement of ethno-nationalism and federalism also see the same distilled images of an unresolved Kashmir dispute: the tying of human shields to jeeps, the use of pellet guns to sever optic nerves; and the lustiness with which India’s leaders remember the spilling of Muslim blood in the state of Gujarat.
As Pakistan elected its first Hindu woman to Senate – an admittedly belated milestone – India’s universalist promises of uniting diverse ethnicities, languages, castes and cultures started after 2014 started to resemble a familiar unfulfilment. Pakistan doesn’t pine for dialogue with India, but it does hunger for a closure to the animosity that prevents economic growth and reined-in defence spending. On the campaign trail, the BJP immortalized questions of identity and fidelity to the republic, and in the process triggered an almost-war for an attack that its agencies could ultimately not trace back to Pakistan. In the saffron glare of the election, BJP politicians erased the line between opposition and social outcast. And it fuelled the search for the “real culprits” behind the division of Akhand Bharat.
The search nearly always returns one name – Jinnah. Exactly a year ago, discontent triggered by the demand for removing Jinnah’s portrait from Aligarh Muslim University blew up into a full-scale confrontation between Hindutva elements and agitating students. In Pakistan, Mohan Road in Karachi continues to be named after Mohandas Gandhi. And the Karachi Chambers of Commerce still boast a plaque with Gandhi’s name. The Mahatma laid the KCCI’s foundation stone in 1934.
Now, India’s tilt further rightwards has legitimized future Pragya Thakurs, the deification of candidacies like hers, and the xenophobic currency they carry. It is true, there was never a real race between India and Pakistan, until now; this is a race to use repression to stifle internal strife, and swap out freedoms for unquestioning loyalty to those who rule. Today, both countries have large youth cohorts that hunger for service delivery. Both countries also have minorities living perilously on the toleration of a puritanical majority. In the latest global press freedom index, the world’s largest democracy ranks only two spots above Pakistan. And as India re-elects a leader who eschews self-reflection and with it the normative value of a competitive electoral arena, Pakistanis continue to be asked why we watch India’s election with a mixture of hope and fear.
We watch because it is the only self-aware thing to do.
Date: May 29, 2019
Saffron Sweep, Again
by: Hassan Akbarhttps://jinnah-institute.org/wp-content/uploads/2019/05/Asia-Advisory-1-1200x609.jpg
For the first time since Indira Gandhi, an incumbent prime minister has returned to Delhi with an even greater majority after completing a five year term. Narendra Modi, who was until six months ago head-to-head in opinion polls with the opposition, has managed to outmaneuver his opponents by breaking new ground. The BJP has gained significantly in states such as Odhisa, West Bengal, Karnataka and Arunachal Pradesh gaining 301 seats in the 542 seat Lok Sabha. With some estimates putting the BJP led NDA alliance at over 355 seats, Modi is shy of just 7 seats to gain a two-third majority in parliament.
Despite stiff resistance to the BJP in UP from the BSP+SP combine and a dismal performance by the BJP’s NDA partner ADMK in Tamil Nadu, the BJP has been able to make up for losses by gaining in their non-traditional turf. What is even more surprising is the BJP sweep in Rajasthan and Madhya Pradesh, where just six months ago the Congress handsomely won state assembly elections. This reversal in two key Hindi belt states can be understood by the inability of the opposition to craft a successful narrative in the face of a deep penetration by a well-timed nationalistic narrative by Modi after Pulwama. The success of the BJP in making the Lok Sabha polls more about national politics and less about state development have helped sell the incumbency despite failures on the economic front with sluggish growth and a disastrous demonetization.
If there is one certainty in this history making BJP win, it is the centrality of brand Modi. Carefully curated interviews and images of Modi have helped position him as a non-dynastic self-sacrificing nationalist who is as comfortable praying in the caves of Kedarnath as he is fighting the hard fight on the borders. For his party though, brand Modi has not been their only sell. Unlike ever before, the BJP has been overrun by an ultra-right RSS brand of Hindutva nationalism. The BJP old guard has been sidelined and instead young die hard bhakts such as Pragya Singh Thakur, a terror accused, and Tejaswi Surya have become the new face of a new BJP.
From Kashmir to Karnataka, the BJP and its many candidates have openly campaigned on an anti-minority and anti-Pakistan platform. Hindutva has been the driving force for the party’s cadres and election speeches have been filled with divisiveness, bigotry and hate. In West Bengal, the BJP has promised to kick out non-Hindu, non-Buddhist ‘invaders’ and labeled the Banerjee led TMC as Muslim loving and anti-national. In Kashmir, the party leadership has promised to do away with Article 35A, the only protection for the State’s Muslim majority. In Kerala, Rahul Gandhi’s rallies have been labelled Pakistani because they have had a greater proportion of Muslims. The breadth and width of bigotry on display has been astonishing. Even more astonishing has been the Indian voter. In an increasingly polarized India, the average voter has rewarded Modi for his militarism on Pakistan, his party’s unabashed Hindutva ideology and the hate speech of the party’s election candidates.
With India’s domestic polity now attuned to hard messaging on Pakistan, the prospects for serious and sustained dialogue are slim. In Islamabad, there is talk of new beginnings post-election and the recent Qureshi-Sushma meeting on the sidelines of the SCO and an exchange of pleasantries between Imran Khan and Modi are seen as promising developments. But both countries have been here before. Modi has been adept at using public visuals to sell a story of outreach without any concrete forward steps. With the Indian electorate rewarding political leadership for a hardline on Kashmir and Pakistan, the ground realities are unlikely to change.
In Kashmir, the insurgency continues with renewed vigor. The BJP has so far refused to negotiate with the Valley’s political leadership. After promising a rollback of Article 370, the BJP is likely to pursue and even more militarised policy towards Kashmir. This will create violence within the Valley and provide little room for any political party in Pakistan to consider a dialogue that does not address Kashmir. The BJP is also likely to continue deploying its recent repertoire of aggressive policies towards Pakistan. This includes a diplomatic push for isolation, blocking the SAARC, a weaponisation of water and the rollback of the MFN status on trade. In view of the expected policy continuation by an even more emboldened Modi government, Pakistan should not expect any overtures to extend beyond temporary crisis management or visuals for international consumption.
Date: May 25, 2019
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1 Aug 29, 2013
A new Sharif in town
omar r quraishi
Farrukh Khan Pitafi
Feisal H. Naqvi
Editor, The News
Daughter of Salman Taseer
Syed Talat Hussain
Anchor, Saach TV
Wajahat S. Khan
Correspondent, NBC News
Columnist & TV Anchor
Ediotr, Dunya TV
Pakistan Tehreek-e-Insaaf (PTI)
Pakistan Correspondent, Reuters
Former President of Pakistan