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Pakistan is going through quite a many ups and downs in all aspects lately, be it in the political upheaval or not, especially common man is the biggest victim of the dilemma as he is continuously besieged to make sense of how the new budget will give him something good in return in the long run.
The details might not have been highlighted to counteract all the fiasco the announcement of the new budget has caused, but the necessity to make fundamental adjustments in the spending patterns to deal with the financial insecurities is the need of the hour.
Economy and inflation are going in opposite directions, and the citizens are as usual under tremendous pressure to keep up with it. This is the only thing that a common man can comprehend in this mayhem.
Experts defending the federal government emphasize book balancing due to the acute financial anguishes that are a threat to the viability of the nation’s economy. For an average citizen, with a confined sense of the big-scale economy, his reason for judging the budget is primary – the effect of the budget on his personal life. If the budget does not bring a sigh of relief for him, it is disastrous.
A national budget has a direct influence on improving the overall welfare of the citizens using an increment in wage, tax reduction, and/or subsidies provision. Otherwise, it can get some transitionary support through controlling prices for utilities and other essentials.
In the latest budget, the government is seemingly making an effort to protect the interest of the lower class through increasing the minimum salary from 16,500 to 17,500 Pakistani Rupees, declaring a 10 percent raise in the wage for grade 1-16 employees working in the public sector. Moreover, it has also shown a green light by making an increment in the allocation of money transfer under the Benazir Income Support Programme, and also an assurance to shield the citizens who are on their lowest economic point through adjustment in the tariff for utilities. The lower class, however, will be equally facing the sandstorms of price fluctuations which would be arising due to indirect taxation.
On implementation, the budget for 2019-20 will be changing the tax regime of Pakistan to a relapsing state by elevating the ratio of indirect taxation from 55 percent to 60 percent in FY19. The ministry of finance claims that the upper class will have to bear the burden of this revenue-generation measure. However, reality pretty much applies exclusively to the middle class.
The upper class has been asked to generously contribute to the cause of generating revenue through the elevation of tax and alleviation of subsidies and exemptions for businesses that the government could not afford. There is hardly any chance that the upper class would be paying more than the past times. The experience will be unpleasant, but it will not at all compromise the quality of living of their families.
For the families in the working class, each rupee matters. This category drives for upward mobility and is perceivable to the idea of social equity. This class often has some area to live in either through complete possession or through rent. They pay for facilities and are willing to compromise for getting education facilities for their children. They are often ready to make sacrifices in the pursuit of their dreams and so are vulnerable to get easily affected by the fluctuations in the finances.
These newly propositioned steps will push them to the edge and grind them in the never-ending cycle of doing immense labor to meet their liabilities. With less time and endless responsibilities, they are often leached out of their right to prosper as capable individuals.
They would continuously have to check their priority list and make changes with every fluctuation they face. These essential priorities go from property investments to as little as kitchen utilities, resulting in a sharp decline in the quality of the products or services bought.
All basic needs, including utility charges, transport, and electricity bills, will occupy a high percentage (around 60 percent) of the total expenditure of the depending family. The rent is inevitable and demands at least 20 percent of the overall expense. With little saving, the family would have to compromise on the tuitions of their children. Hence, it inevitably means no space for saving for a promising future ahead. It is of no major surprise that people are now taking more loans than ever before.
The unignorable inflation and a high taxation rate will reduce the total incomes of all tiers of this class. This massive depreciation has already corroded the value of all kinds of assets. It has, in return, deprived the middle class of everything they held that could have provided them with the comfort of any kind.
The decline in the growth rate is disastrous; from 5.4 percent in FY18 to 3.3 percent in FY19. Moving forward, the growth rate projected as by the government of 2.4 percent in FY20 in a nation where the population rate by over 2 percent means there is no room for any economic growth. With the look of it, any U-turn in this pattern of declining wages and the attenuated job market is nowhere making it possible in the short term.
Moreover, the sharp rise in the interest rate to 12.5 percent by the State Bank of Pakistan has elevated the cost of credit that may add into the factors that put off the forthcoming private investors from initiating and increasing the magnitude of businesses. For wages and job opportunities, it is not a good signal as well.
With the inflation at 7 percent, it is almost double than the last year. With an expected rise in utility and petroleum prices, the government suggests a price hike virtually to a double next year. Consequently, with the same income, the family will be buying 12 percent less than before.
With a decline in the benchmark rate of taxable income to 6 lacs rupees now, people with a monthly income of 50,000 Pakistani rupees will also have to pay tax. That consequently has increased the burden on the middle class.
The devaluation of the currency to 23 percent in FY19 from Rs121 to one-dollar last year to Rs152 now has corroded the value in dollar terms. It has also declined the value of properties by 25 percent even on discount. It did not influence the income of families but somehow did affect the quality of life in families who live in their properties.
It is not the right time to accurately forecast the effects of the regime change on the ruling or ‘elite’ class with the initial projects of the five-year term. If the budget gets passed, it might dethrone the political capital or the working-class constituency.