News Analysis ISLAMABAD - Apparently the government has achieved economic stabilization, and has presented ostensibly a smart budget for 2009-10, targeting economic revival, but the capacity to contain deficit, inflation, and eventually the prices, while encouraging industrial growth, remains a tricky question. Keeping in view the governments missing almost all the vital targets for the outgoing financial year, from the GDP growth rate to the fiscal deficit, one finds it hard to believe that economy managers would contain prices while promoting business and industry at the same time. To a layman, it seems more or less same slogan of revival as was exploited by the economic wizards of the Musharraf regime in the early years of the current decade. Eventually, the vulnerable classes of the country suffered due to promotion of consumer economy while gap between the rich and the poor widened alarmingly. Although the incumbent government itself cries hoarse that it had inherited most of the ills from their predecessors, it continues to follow the suit of promoting consumer economy growth without its coefficient to poverty reduction. Its development plans smack of political gains more than aiming at sustainable uplift of the countrys poor in a systemic manner. The first impression, the 'smart budget gave was that the new fiscal policy of the PPP regime, was already preoccupied with twin questions of security and economy. But circumstance always outsmart economy managers, was the independent comment that followed the budget. Immediately after confidently expressing that economy had got on revival track, Prime Ministers Advisor on Finance Shauket Tarin during a post-budget press conference was faced with tough question of containing inflation consequent upon new taxes and subsidies withdrawal. He was unable to rule out the impact of the new taxes and subsidies withdrawal that totals at Rs 189 billion or so in addition Rs 134 billion carbon tax on petroleum products and CNG prices. And yet he skillfully handled the question saying that inflation would ease down 'INSHAALLAH (if God so wills), in a typical clerics style. With all due respect, general impression about using this Arabic expression of 'if God so wills in Pakistan is always considered as a lame excuse rather than taking full responsibility of a task. So it remains itself a question to take it seriously or otherwise that the top economic manager leaves the question of inflation to Gods will. The 15 per cent relief to the government servants was also considered to be a stimulus for inflationary pressures. Government servants salary increase, whether it is ad hoc or comprehensive, is always considered by the business and trading community as a yardstick to measure the actual inflation and an excuse to increase prices. Notwithstanding President Asif Ali Zardaris declaration that Pakistan needs investment and trade not aid, the resource side of Budget 2009-10 is heavily dependent on foreign loans. Other than remittances, the external resources that the government has been banking on include pledges made by Friends of Pakistan, the multilateral lenders, and last but not the least, the US. That clearly indicates that the revival of the economy was largely tied to inflow of foreign loans rather than investment. Investment is a universal tool of sustainable economic revival or growth. Foreign Direct Investment fell by above 13 per cent during the outgoing financial year. The government blames the ripples of the global economic recession and the state of internal security for alarming decline in the FDI. The two problems of internal security and global recession are still far from their amicable resolution enabling massive investment in Pakistan. They say money flies where it finds safe haven. At the same time, the security situation in Pakistan presently seems beyond the control of the economy managers. It is also time-tested formula that loan-based revival would not trickle down effects to the grass roots level. Only investment could create real economic activity to generate employment in order to dent poverty. The situation in the post-budget scenario indicates the government has been aiming at economic revival through foreign loans rather than investment. If that remains the modus operandi for the economic revival, it is bound to widen gap between the rich and the poor. Though it was the second budget by the pro-people government of the PPP, it so far has failed to fulfil the Constitutional obligation of finalizing a formula for distribution of economic resources through the National Finance Commission. With burning issues of provincial autonomy and harmony still unresolved, the government again missed the opportunity to harness the federating units at the event of annual fiscal policy by finalizing latest NFC Award. Its non-committal gestures towards the NFC raise many eyebrows, as various political parties on both sides of the divide in the Parliament have already raised concerns about the PPP keeping the ball rolling with the Musharraf regimes ad hoc formula as against NFC Award. Afzal Bajwa