The PTI government has announced the second budget of its tenure setting several ambitious targets but the question is whether the economic targets are achievable when the sword of Covid-19 persistently dangles over our head.
As expected, the government squarely blamed the Covid-19 for much of its failures on economic front in the outgoing fiscal year. But interestingly, the economic survey, which reviews the economic performance of the outgoing fiscal year, usually is based on the data from the first three quarters of that fiscal year, tells the economy was even struggling in pre-pandemic period in Pakistan.
The Economic Survey 2019-20 was compiled on the economic data from July 2019 to March 2020 when the contagion had not yet made its way into Pakistan.
The government was way behind its revenue collection and several other targets well before the onset of Covid-19 in the country. Curtailing whopping $20 billion current account to three billion dollars, of course, is an achievement and must be appreciated.
The Covid-19 undoubtedly hit hard the economy which according to the government estimates amounts to three trillion rupees but the government economic team needs an introspection to look deep into what went wrong with the economy since it took power two years ago.
The Covid-19 in likelihood is going to stay for at least a year and the fate of economic targets set by the government for the next financial year would hinge on the pandemic situation in the country.
Unlike most countries in the world, Pakistan has not yet flattened the Covid-19 curve and according to Prime Minister Imran Khan the pandemic is likely to hit the peak in late July or early August. It means the economy would stay under a big distress at least in the first quarter of the next fiscal year.
Though Prime Minister has ruled out possibility of re-imposition of lockdown in the country, any aggravation in the health situation in the wake of growing number of infection cases and deaths caused by pandemic would have negative impact on the economy of the country.
In an interview, de facto finance minister Abdul Hafeez Sheikh admitted that the situation is “uncertain” and if the pandemic went out of control and country was returned to lockdowns then the situation would be completely different.
The government has allocated Rs70 billion for the fight against Covid-19 and other natural disasters like locust attack. The government has not imposed any new tax in the Rs7.13 trillion budget and increased rates of the existing duties and hoped that its packages of incentives for several industries particularly construction and exports sectors would spur a big economic activity that would help offset some of the negative impact of the pandemic.
The government set the revenue target of nearly five trillion rupees, an increase of 27 percent from the outgoing fiscal’s target but it was not backed up by an plan that how it could be achieved.
Though according to the government data the tax collection increased by 17 percent in the fiscal 2019-20, it still fell short of achieving its target.
Critics say the budget appears more to be a traditional accounting exercise by the bureaucrats of the finance ministry than a serious effort by the government to cope with the economic challenges which have deepened with the onset of the pandemic.
They fear that the government might have to revise is targets downwards if the pandemic situation gets serious. They say since the budget speech of the Industries Minister Hamad Azhar should have roll out of a well-defined economic plan in the light of evolving pandemic situation.
The minister should have spelt out the government’s assessment about the pandemic situation in the country and then would have explained its budgetary proposals in the light of that assessment.
Since the budgetary proposals were being floated when the country is fighting a full scale war on Covid-19 much more attention should have been made on boosting the health sector of the country.
There are growing fears that the health facilities would come under tremendous pressure and could even collapse in the wake of fast spreading contagion.
This needed an innovative strategy by the government to deal with this situation.
Though the federal government may argue that the health sector is a provincial subject but since the pandemic has hit every nook and corner of the country it needed a much more coordinated and robust effort to strengthen the health sector of the country.
If, God forbid, the situation worsened then the entire concentration would have to be focus on health and all other considerations had to be set aside.
Apart from Covid-19, the government has to meet the demands of the International Monetary Fund in order to keep its bailout program afloat.
The budget is devoid of any relief for the salaried class and has set a high revenue target but it has many more things in plate like privatization program as well as measures to boost exports and investment.
The government has vowed that it would go ahead with its privatization program but it needs strong political challenges to implement it. Moreover, given global recession caused by the Covid-19 boosting exports and attracting foreign investment is a big challenge.
Some observers have expressed fears that the government may come up with a mini-budget in few months’ time.
The two years performance of the PTI government on economic front showed that it has not done anything different from the predecessors which it has been blaming for all ills of the country.
There has hardly been any innovative step or policy by the government to address the deep-rooted economic malaise.
In his post-budget comments to media, Mr Sheikh admitted the grave economic challenges faced by the government but failed to give even a scant glimpse of a strategy to deal with this situation.
Such problems cannot be solved with mere good intensions. They need to be addressed through a strong political will and a well-devised plan. Tackling of Covid-19 as well as economy would be a real test for the PTI government in the next few months.