When we are living in times where the democratic transition has recently taken place and a new government has come into power the situation of every other thing seems to remain unchanged or the equation balances out neither in the favor of public nor in the favor of govenment, however probably in the favor of corruption. I hope I'm wrong.
There are both positives and negatives we can see from the budget and overall effects seems to be null, economy might revive and stregnthen but we might end up with no lower class left.
Let's dissect through what has happened so far and we could see what is coming next.
The current inflation rate is 5.9% and is expected to go up to 6.74%
CPI is 178.65 and expected to reach 178.76
Trade deficit is 213553 Million PKR and is expected to go down to 185049.81 Million PKR
GDP 3.59 and expected to reach 3.65
Since the major import is fuel and major export is cotton and knit wear we are going to suck and suck at it badly. The only game changer is more exports and that is only possible with power. Looking at the current situation in Punjab the agri capital of Pakistan the power condition has only worsen. The line losses and theft being done is at its peak. Hundreds of businesses in the knitwear industry has moved to Bangladesh and this is just going to bleed us to death.
With MNS visiting China and try to make agreements for power, circular railway getting new investments into Pakistan from the old known friend China this is going to pump more into the system for economy to stand and in fact improve.
I was extremely happy to see UK prime minister saying that we will do everything in our power to increase trade with Pakistan, this will improve the numbers and shorten the trade deficit and in turn improving the currency value.
SBP's interest rate lowering is also a very good sign and will help improve bank's position and more consumer lending and investment in private sector and flourishing the economy and with investments coming in from China, banks would be running after business to offer them funds and improving on the overall condition.
The 5 billion loan from IMF looks negative but it is not if honestly and fairly used. The three-year loan will replenish the central bank's reserves and buy time for the government to slash its budget deficit and fix the energy sector.
Taxes and Cost of living:
The taxes are just blatantly harsh and crueller than ever, be it consumer goods or anything else. The government says we are not increasing the GST on basic necessity item, someone tell them you have increased it on fuel and that cost in turn is paid out of consumer pockets and is going to impact all the items that are not being introduced with GST. The fuel charges will impact electricity and that is going to increase the cost of production/processing. From the cost of running the tube well and delivering goods from fields to markets, to wholesalers, retails and at the end to consumer there are at least 5-8 middle men involved and 1% raise on the cost will be raised at every level for the cost of service which impacts to 8% raise in cost.
The 2 billion subsidy for holy month of Ramzan on utility stores accounts to 10Rs per person of the population, what an amazing package. However you and I don't stand in line but do the real needy get's the subsidy provided or is it the Utility stores management and middle men that hoard on it and make profits and the lower class gets beaten and crushed in lines by our amazing policy.
The cellular taxes are just an another example where the government will lose a lot in the sense of income on taxes as top up volumes will go down and telecom companies will try to grab on to their consumers base by packages and will see the downside on their income. Telenor CEO has already threatened to take out the investment for 3G license run. I have already elaborated the cellular top up carnage in details.
Inflation will rise and cost of living is not going to go down at all, in fact it will rise and like crazy. There hasn't been any relief offered to poor except BISP, which is a very good initiative, but we need to help them learn to catch a fish and not give them a fish, hopefully the government offering loans to SME and lower class for business, this hopefully will be used productively and policy succeeds.
Infrastructural development is the major strength of this government and has always been, hopefully the improvement will soon be seen in the form of mass transit system in Karachi, improved roads and development projects in the entire country.
I wish that with all the above economic stabilizing steps government would have thought of decreasing the cost of living but Alas! I hope and pray that MNS do something about this also and the poor class and lower middle class gets some space to breathe. Economy will flourish as MNS is a business man and he can fix this, he has great business minds around him but the cost of living is going to end the poor and lower middle class and there would not be any left by the time 2015-2016 when economy will be strong enough to sustain for next 10 years.
I have not accounted corruption, internal political, security and foreign factors to this and on top of everything our own personal attitude, becuase we need to change ourselves as well if we want to beat corruption and that is the hardest call to make. Because life is cheaper and justice is overpriced specially for the poor and lower middle class.
I pray that the good things that we could see in the above don't get shot by corruption and Pakistan becomes stronger and powerful with the people of Pakistan, not just on paper and economic crap but in reality on the ground.