The PTI government will announce the national budget for the fiscal year 2020-21 in the shadow of the COVID-19 pandemic that has gripped the entire country.
Even before the pandemic hit the country, the economic situation was not encouraging. Tackling of the COVID-19 would remain the main challenge for the government in the next fiscal year. For countries which have flattened the pandemic curve it is easier and much clearer to set their economic agenda but for Pakistan where the disease has not yet hit its peak it is very difficult to predict what would be the country’s situation in the next fiscal year.
The coronavirus cases are fast approaching towards 100,000 mark and number of deaths are nearing 2,000 when these lines are being written.
In this uncertain situation, it is an uphill task for the government to set next year’s economic targets in the budget and it has to keep these targets very flexible which could be adjusted as the situation evolved.
In Pakistan, three Ds –Defence, Debt, and Development– have traditionally been the main components of any budget.
The successive governments have to make major allocations for these three areas in the budget before allocating funds for other issues.
But this time around, tackling of COVID-19 might become a priority number one for the government.
The seriousness of the situation could be gauged from the fact that as the government is preparing to lay out its annual budget, Hafeez Sheikh, the de facto finance minister has urged the international community to keep helping Pakistan to tackle the pandemic and prepare a robust policy response in view of huge economic losses suffered by the government.
The finance ministry last week painted a very bleak picture of the economy though the worst of the COVID-19 has yet to come for the country.
In a written reply to a question in the Senate, the finance ministry feared that around three million jobs would be lost in the “initial round” of the pandemic. The contagion is also expected to aggravate the poverty situation and it may increase to 33.5 percent from the present 24.3 percent.
Even before the pandemic, there were no chances for the government to achieve its revenue target, but the situation has further deteriorated after the pandemic.
The fiscal deficit is likely to increase from 7.5 percent of the GDP to 9.3 percent because of the revenue shortfall as well as $8 billion stimulus package announced by the government to combat with the COVID-19 situation.
Because of the enormous slowdown in the world economy, the exports from Pakistan are also likely to fall to $21-22 billion. Foreign remittances are also expected to stay in the same range.
Volatility is also likely to prevail in the currency market.
Though internal debt relief is a major concession for the government, the international lending agencies have started pressuring Pakistan to take tough measures to freeze non-development expenditures to free up resources for its fight against coronavirus.
The resumption of IMF’s $6.6 billion bailout package is reported to be contingent on presentation of a budget by the government in line with the IMF recommendations.
The international lender very clearly asked Pakistan to freeze non-development allocations like defence and salaries and instead focus attention on how effectively it could tackle the pandemic.
The demands came amidst reports that the government is being asked to jack up defence-related salaries by up to 20 percent.
Given the geo-political and security situation of the region, it is unlikely for Pakistan to lower its guard by slashing its defence budget and it is feared that it would again go for a cut in development budget to raise money for its fight against corona.
Some observers believe that IMF demands are more of a political nature. If one goes by history, the international lenders including IMF has never pressed hard Pakistan to meet its demands.
The United States, the major financial contributor to the IMF kitty, desperately needs Pakistan’s help for the Afghan peace process. Therefore, it is unlikely that the IMF would go out of way to pressurise Pakistan to strictly follow its diktats, while compiling the budget.
However, Pakistan has to take some measures or at least show off that it is not totally going off the mark.
The economic activity across the country has been literally crippled for three months because of lockdown and the government has to give incentives to the business sector to rekindle economic activity.
But the business community should rationally use these incentives to revive the economic and industrial activity to mitigate economic woes of the country.
But national cohesion is a must to achieve these objectives. The political leadership of the country is as divided as it was before the contagion.
There is hardly any working relation between government and opposition to evolve a joint strategy to tackle the serious challenges faced by the country which have deepened after the advent of the COVID-19.
The parliamentary debates have reduced to exchange of blames and name-calling by the treasury and opposition deputies on COVID-19 issue and government’s anti-corruption campaign, which opposition sees as a vilification drive against its leaders. This acrimony was preceded by the sharp differences between the federal and Sindh governments over the lockdown issue.
The ruling and opposition parties are required to agree on a minimum agenda that should send out a clear message to the people that they are serious in tackling the challenges faced by the country.
It is not just Sindh which is locked in a bitter battle with the federal government but the differences between center and Baluchistan government are also becoming serious.
The reports that Balochistan chief minister Jam Kamal stayed away from a meeting chaired by Prime Minister Imran Khan over COVID-19-related issues and his walkout from another meeting where a major cut was proposed on provincial shares in the NFC (National Finance Commission) show that efforts should be redoubled to forge national harmony.
The major responsibility for making such efforts lies with Prime Minister himself. In the present trying times, he needs to rise above party politics and take all federating units along to forge a united front to tackle the grave problems confronted by the country.
The writer is a senior journalist based in Islamabad