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As in Business & Finance Review, a weekly magazine, Parveen Zaiby stated that financing fiscal
deficit can influence current deficit and foreign borrowings. She suggested that the focus must be
on both domestic and external debt, so as to assess a country's ability to service it. In her opinion,
the growth of revenues and exports is critical to keep the debt burden manageable therefore, the
two should be managed separately to ensure fiscal and external account solvency

She further discussed that the permanent solution lies, however, in an overall restructuring of the
economy, in a medium to long term macroeconomic framework, with the main objective of
reducing the debt burden to manageable levels. Reliance on external debt for financing budget
deficit and subsequently increase pressure on foreign exchange reserves and depreciation of
rupee can be prevented by rationalization of import and providing efficient banking services to
expatriates for foreign remittances, because cost of debt repayment would increase with the rise
in interest rate and depreciation of rupee, as more resources are required. A well managed debt
policy is required to maintain a sustainable level of debt stock. To achieve this goal, the first step
should be the identification and neutralization of the fundamental causes of the growing debt
burden of the country.

A senior official gave following recommendations in this regard:

Ԅ In terms of saving revenues, the austerity drive and efforts towards good governance
would not serve any purpose.
Ԅ Actual austerity measures that could really matter in terms of saving the current
expenditures is putting a limit on the provision of perks with no limits including fuel and
telephone bills.
Ԅ All ministers and secretaries are entitled to unlimited use of fuel and mobile phones
during the month. No one at the helm of affairs was even to propose a limit on the
provision of utilities at the expense of national exchequer.
 Ԅ The idea of saving money for financing the ongoing war on terror has been costing
beyond the estimates of the budget 2009-10. Rather than cutting the current expenditures
as agreed with the IMF, the Government is to follow an easy path of applying a cut in the
development budget. The cut in the development budget would eventually affect the
overall revenue collection as well. As the spending on developmental projects carry a
reasonable amount of tax that comes back to the Government in terms of revenue
collection.

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ÿ„ The strategy paper prepared by Finance Ministry suggested that the Prudent Debt
Management techniques had to be adopted to reduce the burden of debt servicing over the
medium-term. These Prudent Debt Management Techniques include obtaining soft loans
with low interest rates from external resources.
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Dr Muhammad Yaqub, former governor of the State Bank of Pakistan, discussed in one of his article that

 

 
 
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borrowing will only extenuate these problems. Therefore, it is imperative that a sensible debt
management strategy is adopted to address this growing menace. Such a strategy needs to have
the following elements:

ÿ„ First, the present practice of rubber stamping by legislators of the budgets produced by
the executive branch must be replaced by their careful scrutiny and approval. The
executive branch of the government, both at the centre and in provinces, should be bound
through legislation by respective assemblies to keep their internal and external borrowing
 within the annual limits carefully set by them. The assemblies should set such limits after
proper scrutiny of the revenue resources and expenditure plans at all government levels
and the balance of payment outlook for the country. More importantly, governments
should make a quarterly report to their respective assemblies and to the public in general
to confirm adherence to such limits. Additionally, resort to inflationary financing of the
budget should be limited by the SBP by using effectively its existing legal authority to
determine and enforce government borrowing from it ± and this authority should not be
taken away from the SBP under any pretext, giving Ministry of Finance more elbow
room to force the SBP to print more currency notes.

ÿ„ 
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   There is no
justification for keeping on government pay role a herd of ministers, advisers and
ambassadors whose marginal productivity is negative for the country. Careless spending
on foreign trips, lavish parties and extravagant inauguration functions at government
expense need to be stopped. Similarly, import of expensive bullet proof cars and other
equipment for the protection of those at the helm of affairs cannot guarantee their security
as much as a serious effort to eradicate poverty, reduce unemployment, and minimize
frustration and anger of the rest of the population against the conspicuous life style of the
ruling elite.
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  The government of the rich, by the rich and for the rich has not been
willing to broaden the direct revenue base where taxes can be collected according to the
ability to pay and can be so restructured as to promote horizontal and vertically equity.
Horizontal equity means that people at the same income level must pay similar taxes
regardless of the source of their income. Vertical equity means that marginal rates should
rise with rise in income so that richer people pay proportionately more taxes than the
poor ones. In Pakistan both of these sound taxation principles are violated, making it one
of the most regressive and inelastic tax system in the world. At the same time concrete
 policy measures may be adopted to reduce the size of the underground economy which is
reported to have become equivalent to about 55 times of recorded economy and remains
beyond the reach of tax net.
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   If privatization proceeds were used for this purpose in the last
two decades, domestic debt serving would have declined significantly opening up fiscal
space for larger development programs financed from own resources.
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 . Control on inflation is essential not only
to protect the poor but also to spare the budget from rising debt servicing that is caused
by inflation.
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 . The country should use its frontline status in the war against
terror to seek debt relief, debt write off and grants from donors who benefit from
sacrifices of the people and soldiers of Pakistan, rather than to get more interest bearing
loans which add to the long run debt servicing and balance of payments problems.

Whatever combination of measures is adopted one thing should be clear. Unlike in the past, debt
servicing cannot, and should not, be ³financed´ by incurring more debt if further damage to the
economy and stability and sovereignty of the country are to be avoided.
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Thus there is a need for long term planning with equitable allocations for all three sectors of
health i.e. doctors, nurses and paramedical staff other than allocation in infrastructure
development for the health sector.
He demanded  
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, he said. He said in Pakistan, successive governments ignored the health and
education sectors. He said that only during the last 10 years, huge funds were spent on higher
education sector and now it was time to look towards the primary education.

He suggested using government infrastructure, including Army buildings, for evening classes as
it was being done in the US. He also called for improving the Madaris syllabus in accordance
with modern sciences. He said the government was committed to increasing the education budget
to seven percent of the GDP by 2015 under the Millennium Development Goals (MDGs) while
till 2011 it raised it to 2.1 per cent.

Dr Shahila Akram said the literacy rate could be doubled in no time if afternoon and evening
classes were started in all education facilities. However, she lamented discriminatory attitude
was adopted in evening classes. She urged allocation of funds in budget for evening classes.

She said that in 18th Amendment, the government had left the pharmaceutical industry at the
mercy of provincial governments rather than under the Drug Regulatory Authority, which had
increased its problems. She was of the view that continuity of policies could improve the
education and health sectors.
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Social evils like unemployment are increasing day by day because of the poor education system.
In order to make headway and compete with other countries, Pakistan should pay attention to
education by spending more money on it instead of on weapons.
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