Budget Simplified

Jun 2nd, 2012 | By | Category: Latest, Pakistan, Social

Budget 2012 was being presented in National Assembly and it reminded me about my lab attendant. His newly born daughter died last month during labour at home  in a far flung village of KPK . He was not able to afford the delivery expenses in hospital and therefore he opted for labour at home. I came to know about it when he had already left home after hearing the sad news of demise. When he came back, he told me that he is earning about 10K and the charges of a hospital delivery were not bearable for him as the medical tests and medicines were quite expensive. I was thinking that whats in the budget for him.

Finance minister tried to convince people that they are living in a heaven while when we look around, its totally a different picture.  There is indeed a darker side which does not match with the claims of present regime. Are you confused in the budetary figures? That is why the budget does contain all this fuss. It is an attempt to show the brighter picture when there is dark all around. To cover up the bad governance and corruption of the government, people are trapped in heavy figures to show that the country is in best condition.

So what are these calculations all about? Lets make it simple, consider the following example. If there are only two persons in a place, one has earned Rs 100 and other has not earned anything. Now calculate their GDP, its Rs 100. Their per capita income is Rs 50.  GDP includes the earnings /spending of all, in which the rich elite becomes a significant factor, but poor people contribute little to it. Growth rate of GDP  depends more upon how much ‘richer the rich have gotten’. So even if growth figures are high, they are significant only for the rich elite. The facilities are available, but not affordable for the common people.

What is the real purpose of a budget then? Ideally speaking, the budget is an estimate of how much we are going to earn and how much we should spend. It allocates money for different projects. Its a document which reveals that how much of the previous targets were achieved and what are the new targets; that’s it. But the government tries to cover its ugly face by using heavy terminologies. A lot of time these figures are falsified, their impact is blown out of proportion, just to cover the mess the government has created.

Current budget is again a same budget with false promises. A huge part is being spent on defense, government expenditures etc. 70 billion rupees being spent on Benazir Income support program is a wastage of money. This huge amount could have been used for the better projects related to education, health, infrastructure and energy sector.These figures didn’t mean anything to the poor labourer who is trying hard to make both ends meet. It doesn’t mean anything for the person who is sick and spending all he could to get a proper treatment. Joblessness is becoming a huge problem in the country. Industry is closing down and millions are loosing jobs. Current Budget is in heavy deficit. It simply means that earnings are less and expenditures are more, government will not reduce its expenditures but will borrow more money. Rich industrialists are not paying taxes and common people have to pay tax on everything.

Now lets talk about increase in salaries. When salaries are increased by same percentage for all, it means peanuts for poor (low grade employees) and huge increments for high grade officers. It widens the already huge gap of rich and poor in the country.  A grade 22 officer earning in six figures, with all the benefits and previliages cannot think about the problems faced by a poor. While price hike and inflation is same for all, increase in income is not similar. It makes the poor ‘poorer’ & the rich ‘richer’

So this budget is a budget for elite class. They will get benefited. Poor will not get any benefits unless we change the system. Only one budget so far has ever been termed as a budget for poor people, and that was presented by Liaqat Ali Khan in 1946. Other than that, whichever party was in govt, circumstances were same for ordinary class. The capitalistic economy needs to be uprooted and Islamic system of finance needs to implemented, which ensures flow of wealth from rich to poor; only that is the way out.

Muhammad Saad Khan

About the author

Muhammad Saad Khan is a Biomedical Engineer with a diverse background of engineering and management.

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  1. It’s not capitalism itself but nature of people that is ill. There are islamic countries that have been mismanaged without any intervention- simply old classic feudal systems did not cope with the reality. If you look at the Indian economy Calcutta is the worst place as it had communistic local regime for many decades- people are escaping from there. When Bangalore is a technology hub with lots of jobs. Yes you should cut defense bidget as it doesn’t stop corruption and a lot of dangerous people seem to operate quite freely despite budget spending on defence. Education, health system, energy sector – this is all future, agreed. But in a healthy non communistic non feudal economy. Feudalism in any sort, communism in any sort is always short sighted, even if it seems a perfect solution for any poverty problems. Flow of wealth from rich to poor in Robin Hood sense won’t pay off. First they need to be taught how to fish and created conditions to fish for themselves. If they are only given a fish- nothing won’t change. So what model for the future? That is the question.

  2. where does Islam say about ensuring flow of wealth from rich to poor? it has a zakat system to serve some poorest or otherwise incapable people but it doesn’t talk about redistribution of wealth. Islam talks about justice.Economic Justice is equal economic opportunity not forced economic equality (thats socialism). Islam encourages people to work not to keep an eye on the money of rich people and try to get some share out of it.Islam is about equality infront of law and as human beings but at the same time it has a culture of merit encouraging people to earn halal income.

  3. I fully agree with the criticism on benazir corruption support program and defense budget. bigger the main problem is that govt is involved in everything . size of the govt needs to be reduced, free market economy and decentralized governance/legislation should be adapted instead of this tightly centralized system run by military and feudal elite.

  4. Thanks for the feedback Aga and Faisal.

    I must clarify that i didnt mention socialism anywhere in the article. I talked about Islamic Financial system, which indeed is based on principles of justice and equal opportunity of earning. Zakat is also a full fledged system, incorporated to make sure that the poor doesnt remain poor always. Zakat ensures that the poor people are lifted up. Thats why it is an obligation for Islamic government, to establish central zakat system and ensure its fair distribution. Also Islamic financial system eradicates interest which is the basis of capitalistic economy. Thats why in Islamic system, the wealth is not accumulated in few hands, and thats what i meant when i said ‘flow of wealth from rich to poor’

  5. A nicely written article….Well said Saad..I have already said that Pakistani budget is nothing than a serious joke…Budget for the elite class only…!

  6. A coherent and comprehensive article for a common reader, who has no Know-how about economics and budget complicated figures. If our Govt. was honest and budget benefits common man (Day dreaming), then , no one will talk about Islamic finance system. Accumulation of wealth is not forbidden in Islam like in Capitalism.

  7. Hmmmm… moreover, the financial figures do not account for the rate of inflation of the currency. Lets say that last year, the government spent rs 100 on the health of people, so last year, Rs 100 were enough to buy a person a full treatment of some particular disease. Now, the prices of medicine has reached Rs 200 and if the government has increased the spending from 100 to 150 means a 50% increase in the health budget and it sounds a colossal deal, however, in reality, this Rs 150 are not even enough to buy the same medicine for a person in full dose.

    Well, I am intrigued by the ‘change of the system’ , do you mean a change in the financial system or the change in our social system? I am telling you my bro that even if we somehow manage to implement the ‘true islamic system’ in this era, our parts of the system will still find ways and means of corruption. If you talk about islamic financial system, then please read out the literature on the “Profit and Loss Sharing Account” or more commonly known as the PLS account. The literature and the policies defined are congruent to the islamic guidelines, but the practical results are very well known….. nobody has ever got to share a ‘loss’ on his account….. 😉

    Last but not the least, I am really disappointed by your style of writing these days, it seems that you were pretty overwhelmed with your emotions and less focused on the subject matter that is why your article contains your opinions and not much facts and figures.

  8. Dear Faisal
    Islam roots out the system of interest and usury and hence the biggest source of wealth disparity is scrapped and hence there is equal opportunity for all and then zakat is meant to help the weakest section of the society.

  9. Excellent article, Saad!
    This budget is indeed a budget for elite class. Democracy is proving to be as selfish as it can get, rewarding its ‘owners’ beyond measure, beyond imagination. For any hope of getting out of the present vicious cycle, the people of Pakistan will have to uproot not just the capitalist-economy but the entire superstructure of capitalist-democracy in place and replace it with just, equal and sustainable systems of finance and governance based on edicts of Shariah. May Allah help them help themselves. Amen.

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