POLICY
The economic managers of the government are preparing for the next fiscal year’s budget under the shadow of a much polarised political situation.
Though the opposition led by Imran Khan failed to convince the Supreme Court of Pakistan to send the prime minister home in the Panama Leaks case, it has intensified its pressure on the embattled prime minister to step down on moral grounds as the five member bench found the arguments from the government side equally unconvincing to give a clean chit to the Sharif family.
That’s why it has ordered the formation of a joint investigation commission to look deeper into allegations of corruption against them.
Opposition is in disarray and could not join their ranks to create a joint front against the government, but every opposition party has intensified its own campaign against the government.
In such a situation, the government could not afford to present a budget that could whip up public sentiments against it. Therefore, there are all indications that the government in all likelihood would announce a budget full of populist initiatives aimed at winning the support of the masses.
Even long before the announcement of the Supreme Court verdict, finance minister Ishaq Dar himself had made it clear the kind of budget in the making.
“The government would accord top priority to the wellbeing of the people in the budget for 2017-18,” Dar said a few weeks back. “The budget would also focus on measures for further improving ease of doing business and increasing financial inclusion in the country.”
The country has literally gone into an election mode after the announcement of the Panama case verdict.
Pakistan Peoples’ Party (PPP) has announced plans to address public rallies across the country. Its co-chairperson Asif Ali Zardari has already addressed some public meetings in Khyber Pakhtunkhwa and in Punjab.
The Pakistan Tehreek-e-Insaf (PTI) last week held a big rally in Islamabad – the first of series of such rallies it plans to hold -- to press Prime Minister Nawaz Sharif to step down.
This anti-government campaign would continue at least for the next two months when the joint investigation team is expected to conclude its inquiry and submit it to the apex court.
The government has not yet responded to opposition rallies, but one cannot rule out the possibility of the Pakistan Muslim League-Nawaz (PML-N) launching its own mass contact campaign to counter opposition’s onslaught.
In such a situation, one can easily conclude that the government’s focus would be more on politics than on economy in the coming months.
Even before the Panama case verdict was announced, the government had taken some steps indicating that it was trying to shore up its support among the masses way ahead of the elections.
The federal government last month approved about 97 natural gas expansion schemes mainly for Punjab – the power base of the PML-N - by relaxing moratorium on new gas connections.
The move drew strong criticism from Sindh and the provincial chief minister Murad Ali Shah wrote a letter to the prime minister, warning that such a move could hurt national harmony, forcing the federal government to completely lift the moratorium.
Observers believe that at a time when the opposition parties are ramping up their pressure, the PML-N government would dole out huge sum of money for development schemes throughout the country for political reasons.
“I have come with pockets full of money,” prime minister said at a recent rally in interior Sindh, while taking a jab on PPP in its stronghold.
Sharif announced a grant of Rs2 billion as well as a number of development projects for the impoverished district, including electrification of villages, gas supply, women vocational training centre, and Pakistan Agricultural Storage and Services Corporation Centre.
Similar lavish spending is expected of the government in other parts of the country as well.
The provincial governments led by PTI and PPP are also announcing such populist development schemes.
The PTI, which strongly opposed metro bus for Lahore as a waste of public money has now itself approved such a project for Peshawar with some reports suggesting that it would incur more cost than that of the Lahore project.
One of the reasons behind the government’s lavish spending on development schemes is also to deflect public anger over continuing long power outages during the summer season.
The PPP as well as Jamat-e-Islami have already launched protests in Karachi and other parts of the country over the power outages and other political parties might also join the bandwagon.
Analysts fear that in view of heightened political frenzy, the government would throw caution to the wind, which would be a bad sign for the country’s economy.
“It will be an election year budget,” senior economist Dr Shahid Hasan Siddiqui said, expressing fears that the much-needed structural reforms like measures to curb tax evasion, withdrawal of subsidies etc would be put on a back burner. “The budget is expected to be replete with relief packages, incentives and lavish concessions like tax amnesty and tax exemptions for different sectors to win support ahead of elections.”
Such budgetary measures would ultimately result in increase in the budget deficit, meaning that there would be more losses than relief.
The government has already admitted that the budget deficit for the current fiscal would overshoot its target of 3.8 percent and is likely to end up at 4.1 percent.
Earlier this month, at the conclusion of the Article IV consultations with the finance minister and his team in Dubai, the International Monetary Fund (IMF) warned that Pakistan’s “hard-won” economic stability achieved in recent years was at stake. The IMF warned in case no strong measures were taken regarding fiscal consolidation and implementation of key structural reforms as well as strict vigilance in managing the country’s external position.
Siddiqui fears that after elections, regardless of which party wins and takes up the helm of affairs, the government might not implement the painful structural reforms, as the country would already achieve high growth because of the China-Pakistan Economic Corridor (CPEC).
He said structural reforms have been deferred by successive governments for close to a quarter of the century, and they were unlikely to be introduced by any future governments as they could not afford to annoy powerful lobbies.
“Our rulers have been following the policy of ‘gains now, pains later’ and they are likely to continue with this policy in times to come,” he said, and added “they should know that without structural reforms, there is no possibility of improvement in the economy of the country.”
The writer is a senior journalist based in Islamabad
