Non-crisis, populist budget

By Farhan Bokhari
June 10, 2023

ISLAMABAD: Finance Minister Ishaq Dar on Friday unveiled a ‘non-crisis’ budget with little more than a passing reference to the grave challenges that Pakistan will inevitably face in the coming financial year. In sharp contrast to a historic slowdown of Pakistan’s economy during the financial year which ends this month, a nearly 30 per cent jump in the FBR’s revenue target to Rs9.2tr next year marked a virtually impossible milestone.Even if the government, whose tenure during the new financial year will be barely six weeks till mid-August, succeeds in setting the pace for a recovery next year, achieving the revenue target will remain an impossible task.This will especially become a futile endeavour as the industrial sector, whose output has badly plummeted this year, will take time to recover -- if at all.


And with a deep-rooted crisis of governance that continues to undermine output from the agricultural sector, a bold and swift recovery to aid the budgetary targets looks unlikely.Meanwhile, the target for next years’ inflation at 21 per cent or roughly half the running inflation at the moment also inspired little confidence. Though Dar may well believe that the rupee will eventually rebound and regain some of its lost ground to trigger improving economic stability, there’s plenty of evidence to suggest the contrary.Further devaluation of the rupee may add to the cost of living for Pakistan’s average households, flowing from trends like an unexpected rise of global fuel prices. Even if international fuel prices remain around their present level, other factors that press the rupee will not help reverse price related trends.An additional element to fuel uncertainty in Pakistan during the coming months will be the upcoming political transition, first to an interim government and subsequently to a newly elected one. On the contrary, a delay in elections as still feared by many observers will hardly help inspire confidence in the economy.

If Friday’s budget was meant to fill the void with the IMF as predicted by Prime Minister Shehbaz Sharif before Dar’s speech, the jury is still out on the future. It is now up to the Washington-based lender to decide if indeed Pakistan finally qualifies to return to the Fund’s ongoing programme and receive the next installment of $1bn under an existing loan programme. Questions may well be raised on obvious matters like next year’s revenue and inflation targets.But for the future of Pakistan, the budget poses the danger of becoming a lost opportunity.For the ruling structure, the budget which came on the heels of an unprecedented weakening of Pakistan’s economy, presented the ideal opportunity to break away from tradition.The budget could have delved into areas like taxing the rich robustly and forcing the untaxed with means to join the tax net. Though Dar spelt out such objectives, notably through adding a financial cost to the well endowed who can afford to hire foreign nationals as domestic workers, this is no more than a populist move.

On the other hand, little was said about reforming the public sector which has repeatedly forced a major financial drain on Pakistan’s national resources. State-owned and financially bleeding companies, notably PIA or the energy companies or other similar entities, received little mention in the finance minister’s speech. Though they continue to burden Pakistan’s national economy in more ways than one, our ruling structures including the present one have shown little appetite for fear of a backlash from their powerful unions, especially in an election year. And that is tragically just the most obvious sign of the vital point missed in the budget – that of beginning to fix Pakistan’s economy beyond just wishful thinking ahead of another tough financial year.