The first year of Pakistan Tehreek-e-Insaaf’s government will be remembered as the year of low economic growth and high prices as PTI present the federal budget in the National Assembly on Tuesday and the centre government did its part to represent the whole country. According to the budget 2019-20 document,

the Ehsaas Programme will benefit extremely poor people, orphans, homeless, widows, differently-abled persons and unemployed individuals, while a new ration card scheme is also being introduced for provision of proper nutrition to one million deserving people. As per the scheme, mothers and children would be given special diets for their health. In addition, 80,000 people would be given interest-free loans.

Six million women would be given financial support in their saving accounts and access to mobile phones while free online courses would be offered to women and children from the 500 Kifalat houses. However, the hue and cry by the five major zero-rated export sectors of the country, the budget is the removal of zero-rating facility to five export-oriented sectors, including textiles, and imposition of normal 17pc GST despite strong opposition from the industry. In return, the government has promised speedy refund claims against actual exports. From sales taxes, the government is expecting to raise Rs250bn incremental revenue, via GST rate adjustments in various areas and elimination of zero-rating.

PTI first budget hit every citizen equally, with no discrimination based on political beliefs. The anti-poor nature of the Rs7 trillion carrying a deficit of Rs3.137 trillion can be summed up in the federal excise duty (FED) imposed on one single item cooking oil. The duty has been increased to an astounding 17 per cent.

Besides, taxes on powdered milk, cream, and a host of other food items of common use have also been increased. In other part of world, items considered basic groceries are tax-exempt because such taxes have a crushing impact on the poorest of the poor. After all, everyone, rich or poor, needs to eat. Various food items are already subject to sales taxes if bought at larger grocery stores which accept electronic transactions.

In the budget, lower grade government officials and pensioners have been given reasonable raises of 10 per cent, the pay raises of five per cent for government officers in grades 17 through 20 are not even enough to keep up with inflation, while senior bureaucrats have been denied raises altogether. But at least, as a token, they cut the salaries of National Assembly members by 10 per cent.

Meanwhile, the military’s budget remained unchanged from last year, however, the government’s tall claims of austerity, the budget for the next fiscal year has proposed an 18.8 percent increase in the non-development funds of the Prime Minister’s Office.

The Federal government has allocated Rs1.171 billion for the PM Office in the year 2019-20 against the outgoing year’s revised estimate of Rs980 million.

The fiscal deficit the gap between the government’s revenues and spending also remained high due to the increased burden of interest payments and expenditure on security, law and order. To provide some numbers, government borrowing since the start of fiscal year 2019 now stands at PKR 4.8 trillion which exhibits an increase of 2.4 times if compared with borrowing undertaken during the same period in the last fiscal year.

The expectations of future high inflation are also a cause for concern for the common man.

However, this will inevitably hurt the poorest and their consumption. Rising prices of inputs and particularly imported raw material and machinery have also increased the overall cost of production. In fact, private sector borrowing rose during and after the second quarter of fiscal year 2019 to cover the working capital requirements which increased in rupee terms.

The PTI-led government now needs a clear strategy to explain to the public why the country is experiencing a five-year high in inflation levels, and exhibit that both fiscal and monetary policy measures have been put in place which will reduce the burden of fast rising prices on the poor.