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Budget Speech 2008-09


Mr. Chairman:

The coalition government has inherited a mess that we all know. This has been debated on this floor for weeks and weeks, and outside the floor as well. This mess has been inherited vhrough no fault of ours of course, and for perhaps in some cases through no fault of the previous government as well, because these certain things are very global and international that have impacted the budget. The long term planning should be to accommodate all the challenges that we will be facing, not just in the next five years, but perhaps in the next 20 to 25 years. That is how the planning of Pakistan and of our budgets should go like.

If you look at the most recent issue of the Economist June 13th, an article called ‘Melting of Asia’ discusses the impact of global warming in the Himalayas. What they call as the Asian Brown Cloud, something like a Smog, that is hanging over North India and North Pakistan, and is going to make a major impact on our environment. The average rise in temperature, which is like 0.6 degrees C, for this particular region is going to be more than one degree C, with the result that by the year 2020, or maximum 2030, most of the glaciers in the Himalayas would have melted away. These glaciers are the source of water for all the rivers that are feeding South Asia.

So when we are talking about building large dams, there is water only for a few years coming from the glaciers. 80% of our water is coming from the glacier and 20% from the rains. Also because of environmental changes and climate control changes, the pattern of rains has been shifting in the last five, six years. So, what we are looking at 15, 20 years down the road is the disappearing of the rivers in South Asia. That is something that we need to be ready for instead of planning large dams.

So how do we get water? What is the solution? The present government proposes setting up of a large number, a whole network of small dams, in streams, in small rivers, and to act as a catchment for the rainwater which goes to waste into the sea. So, these can be used for both storage of water for agriculture as well as for small scale power generation.

The government plans to build 100 such small dams over the next five to ten years, and we hope that following these five years, whatever government comes would be able to continue with these policies. I am glad that only two days back, the Co-Chairman of the party in Karachi announced about building of 14 small dams in the province of Sindh.

So one is the crisis of water, the second that we have been discussing on and off is the crisis of oil. The global price of oil has doubled just in the last one year alone, and today we are paying about, let’s say, approximately 130 dollars a barrel. As we all know one barrel constitutes 42 gallons. This is of course the American gallon. If you divide that, then the cost of oil at the refinery is 3 dollars a gallon. Now, if you add the cost of transportation, the cost of shipping, the cost of distribution, the cost of marketing and of course at the pumps, they run to about 4 dollars a gallon. That is about 1 dollar a litre, one dollar a litre is like sixty five rupees to a litre. This the price that we are currently paying through no fault of anyone, because the global price of oil has gone up.

This leads to the problem of inflation, because when oil goes up, the fuel cost goes up, everything as we know goes up. I will not go into the debate how different things are connected when the cost of oil goes up. But, then another thing is, indirectly it is also impacting on the food crisis. Because, just this year alone, one hundred million tons of grain have been transformed into fuel, because fuel will pay you more than grain for food. And this hundred million tons is enough to feed 450 million people. So you can very well realize the impact of the high price of oil indirectly on the cost of food. And that is why the food prices not just in Pakistan, but all over the world, including in the United States and Europe, has gone up, and lot of people are drastically shifting their eating policies and eating habits. In Bangladesh for example, there was a potato festival in the last month, and there was a campaign that says, “think potato, grow potato, eat potato.” They want to shift away from their staple rice into alternate foods.

Then there is not just the oil price, but there are many other factors that have contributed to the increasing price of food. Senator Haroon last week gave a very good speech here when he talked about the various factors that contribute to the rising price of fuel. In addition to fuel and its conversion into ethanol, there are many other factors like the rising middle class, in China and India with the population of over 2.5 billion, environmental factors, and the international global recession amongst others.

And within Pakistan, we are only adding fuel to fire. We cant even afford to add fuel to fire, because fuel is so expensive, but then we have our own water crisis. The rivers are drying up, there is less land to be cultivated, more land is reverting to water logging and salinity, our crop yields are low, and there is a complete breakdown of infrastructure, particularly dealing with the agriculture sector, like in the canals, the irrigation channels and the barrages. And add to that our rising population, maybe in the next thirty years, we will go up from 16 crores to 32 crores. So, we will have less water, we will have less food, but we will have twice the number of mouths to feed.

Then we have inherited the energy crisis through no fault of ours. Last eight, nine years, when we say hardly any Megawatt has been added, let me correct, there might have been smaller units of five, ten, fifteen, twenty, twenty five Megawatts that might have been added to the Grid, but when we say hardly any Megawatt, we mean large Power Stations. The last one that came on line was the Ghazi Barotha which is 1450 MW that came online around the year 2003. That is basically the one that saved us because Ghazi Barotha, which was a result of the previous governments, previous means, Peoples Party and Nawaz Sharif’s government’s, policies. Had it not come on line, today we would have seen load-shedding of the order of maybe twelve hours a day. Then there was the power policy of the Pakistan Peoples Party in which about 4000 MWs were added in the last tenure. Because of that, I say we have literally saved our skin.

So what do we have now, we have a water crisis, we have an oil crisis, we have a food crisis, we have an energy crisis, and that is where we take charge of creating the model state.

And what do we inherit in the economic sector. As I look at some of the sheets in the Economic Survey of Pakistan in the budget, a shortfall of over Rs.522 billion when it was inherited in February – March, a deficit running at about 9 to 9.5% which I think, will perhaps be reduced to 6 to 6.5%. Trade balance at 15 billion dollars, external debt and foreign exchange liabilities at 42 billion dollars now, and these were only 35 billion in 2005. So you can very well imagine, these are numbers which are of course recorded, an increase of 7 billion dollars in foreign debts in just four years. And on top of that, domestic borrowing goes up from 2.9 trillion rupees to 5.7 trillion rupees since 1999. So what happens, you do not need rocket science to understand that once you start printing notes, you put out double the number of notes in circulation, it is only going to lead to inflation and obviously devaluation of the currency. So we are going to see a lot of that happening, which we have already seen. People are saying since the People Party and the coalition government came in power, the rupee went up, the dollar rupee parity went up from rupees sixty to rupees seventy. Obviously it went up because there is so much surplus currency in the market.

We are now asked to come up with development projects when we have no power, no water, no dams, the National Airlines is gone down the drain losing about 18 billion rupees, broken roads, broken bridges, the railway infrastructure has collapsed. So obviously you need a lot of money and have to prioritize where to go.

I would like to congratulate the Finance Team of the coalition government Mr. Ishaq Dar, Mr. Naveed Qamar and their other Financial Managers that have worked over time in the last two or three months to come up with a reasonable budget with their hand tied and with very strong limitations. There are about 1700 development projects in the PSDP, and in these development projects there is an emphasis on all the problems that I mentioned about.

There is an emphasis on energy, we expect to add about may be 1800 to 2000 MWs in the next one year to 15 months alone. There is emphasis on employment, there are Rs. 28 billions in Public Works Programme. There is emphasis on Housing, about 1 million Houses will be made, and of course there is support of the poorest of the poor, which is under what is known as the Benazir Income Support Programme, Rs. 34 billion have been allocated.

Talking of the food crisis, agriculture has given top priority through Rs.75 billion for efficient use of water, and subsidies on fertilizers, support of wheat price from Rs. 510/- to 625/- per 40 Kg bag. I think we have done a lot what we could do with limited resourses and inheriting a deficit budget, and I still personally believe more could be done. We have yet got to see the senate recommendations that will be placed on the floor of this House. But since the Prime Minister’s Secretariat, the National Assembly and the Senate have cut down their budgets, it surprises me why the budget for the Presidency has gone up. I think, equally, with the same good spirit, the budget of the Presidency should also be reduced, at least with same percentages as the budget for all these democratic bodies have been reduced.

The other one, I would like to see is more money for education, particularly at the lower and at the primary level education, not at the higher education, because we have got very weak foundations. We can no more afford to make nine Engineering Universities with foreign collaborations and at the cost of 200 billions rupees. I think, that is something that should be thrown away at least for the next five to ten years, and we should focus more on primary education.

Thank you Mr. Chairman