LAHORE Financial experts, economists, political leaders and intellectuals on Saturday warned that the forthcoming budget 2010-11 would be tight, tough, and hard for the masses as the government was all set to impose heavy taxes with major reliance on foreign borrowings. They also predicted that inflation and fiscal deficit would swell substantially, forcing the government to slash the Public Sector Development Programme (PSDP) funding in case the rulers failed to cut down non-development expenditure. They also argued that economic mismanagement and cut in PSDP coupled with high inflation could lead to slowing down of GDP growth which had already been recorded at very low, i.e., at about two per cent. They also asked the financial managers of the government to take the situation more seriously in order to tackle the emerging economic, security, governance and political challenges. The speakers were addressing the annual pre-budget seminar 'Challenges to the Economy held under the aegis of Nawa-i-Waqt Group in collaboration with Muslim Commercial Bank (MCB)/Privilege at a local hotel. Chairman and Managing Director Nawa-i-Waqt Group Majid Nizami, Deputy Managing Director Nawa-i-Waqt Group Rameeza Majid Nizami and Justice (r) Mian Aftab Furrukh were also present on the occasion. Renowned economist and former finance minister Sartaj Aziz, Senator Ishaq Dar, Dr Hafiz Pasha, Dr Aisha Pasha, Dr Ishrat Hussain, Dr Qais Aslam, Tariq Jamil, KM Azam, Dr Rafique Ahmed, Mrs Shafqat Sultana, Dr Shahid Siddiqui and Senator Waqar Ahmed addressed the seminar while Editor TheNation Dr Shireen Mazari acted as moderator. Addressing the occasion, Senator Ishaq Dar termed the last decade a 'lost decade and said during this period the former regime had failed to increase the tax to GDP ratio, which had decreased 14 per cent to nine per cent. We need to create a tax culture and wealth tax is a best option in this regard. We are terribly relying on indirect taxes. We have to impose taxes on those who have the capacity to pay. We have to increase direct taxes and not the indirect taxes, Dar maintained. He strongly criticised the imposition of Value Added Tax (VAT), saying, It is indirect tax. It is going to create huge inflation in the country. It will also hit the people hard. He further said that VAT would be a failure from the very first day. According to him, 16 per cent GST would swell to about 23 per cent in case it was replaced with VAT. Sartaj Aziz, while addressing the participants termed, the less tax to GDP ratio a chronic problem but said as far as foreign exchange reserves (above $15 billion) and Current Account Deficit (C/A) were concerned, the situation was better during the current year as compared to the previous one. He said the C/A deficit had come down due to decrease in import of machinery. Minister for Privatisation Senator Waqar Ahmad advocated for taking out-of-the box decisions to defeat the present economic condition. Drawing outlines of the weak economic situation, he said the time had come to focus on economy after settling down political issues; otherwise the situation would become shabby. In the context of huge debts on three major companies OGDC, PSO and PPL, he counted the circular debts as major problem forcing the nation and the industry to face gas and power shortages, which had in turn resulted in less productivity, unemployment and economic miseries. Dr Aisha Pasha, Director Institute of Public Policy, Beaconhouse National University, stressed the need of resources mobilisation as a means to increase GDP. She also spoke for enhancing tax to GDP ratio so as to enhance spending on public sector programmes like education and health. Former Governor State Bank of Pakistan Dr Ishrat Hussain said the problems of Pakistan lay in the economic policymaking. He pointed to lack of implementation capacity as a serious issue at the governance level. He also urged the need to centralise the distribution of resources. Stressing the need of political consensus, Ishrat said continuation of economic policies could help revive national economy. Vice-Chairman Nazria-i-Pakistan Trust, Dr Rafique Ahmed said the affluent classes of the society should be taxed properly for generating the resources. Underlining the need for fundamental reforms in the taxation system, he proposed that real estate, agriculture and corporate sectors should be taxed properly, so as to ensure equal distribution of taxes among all the classes of the society. Mrs Shafqat Sultana, President First Women Bank, speaking on the occasion said fair taxation system was the need of the hour while the upcoming budget should reflect the needs and demands of the people. Import duties should be increased, while the Pakistani embassies should play proactive role for increasing the exports, proposed Shafqat. Addressing the seminar, Tariq Jamil, a leading banker, suggested 50 per cent voluntary cut in the salaries of all the ministers at both federal and provincial levels and a voluntary freeze on payments of salaries (not expenses), for five years, to all members of the National and provincial assemblies as well as Senate. He also proposed relocation of offices of the President, Prime Minister, all federal/provincial ministers and governors of provinces to austere and inexpensive accommodation to put the house in order. Referring to the challenges faced by the economy and its long and short term solutions, prominent economist Dr Shahid Siddiqui stressed upon revisiting the policy on war on terror, reducing unproductive expenses, increasing direct taxes at the expense of indirect taxes, deferring levy of Value Added Tax at least for one year and focusing on health and education. KM Azam said foreigners were interested in investing in the country but it was bureaucracy that had been creating hurdles.