Money Matters

The snakes and the ladders

Money Matters
By Zeeshan Haider
Mon, 06, 19

The Pakistan Tehreek-e-Insaf (PTI) government is all set to announce its first national budget for the full fiscal year tomorrow.

The Pakistan Tehreek-e-Insaf (PTI) government is all set to announce its first national budget for the full fiscal year tomorrow.

According to the government officials the budget for the financial year 2019-20 would be aimed at promoting austerity at the government level to bring down fiscal deficit and free up funds for social sectors like health, education and development of the backward areas of the country.

The details of the government’s agreement with the International Monetary Fund (IMF) for nearly $6 billion bailout package are still to be revealed because it has not been approved as yet by the Fund’s top brass, but the budgetary proposals seem to be in line with the lender of the last resort’s recommendations which have generally been spelt out by it from time to time.

Just days before the announcement of budget, the army conveyed to government that it has decided to freeze its budget at the existing level in order to join the government’s drive to stabilise the economy.

Prime Minister Imran Khan warmly appreciated the gesture and assured that the funds freed up from this move would be used for the development of tribal district recently merged with the Khyber Pakhtunkhwa (KPK) as well as on Balochistan. The government’s other austerity measures would be announced in the budget.

Alongside austerity, the government plans to shore up its revenue collection to meet its expenditures and has thus announced an ambitious target of Rs5.5 trillion for the revenue collection for the upcoming fiscal year.

The government miserably failed to meet the revised revenue target for the current fiscal year but the officials are confident that their new target is achievable. This, the government officials say, could be done through broadening the tax base and adding more well-off people into the tax net.

Such big aims deserve commendation, but if history is any guide then tall orders of these sorts are seldom followed up and at the end the already broken backs are burdened with more taxes to meet the shortfall.

And this is what happened over the past one year when the government increased the utility charges drastically to meet its expenses.

Since coming into power, the government has allowed the rupee to depreciate in its bid to allow market forces to determine its value as demanded by the IMF but this depreciation needs to be followed up by efforts to boost the exports in order to ease pressure on the foreign exchange reserves much of which are made up of the borrowed money.

The government needs to incentivise the export sector, though over the past two years the incentives given to this sector failed to spur growth in this vital sector.

Private investment is another key sector which needs to be attracted through a variety of incentives.

The security situation of the country has markedly improved over the past couple of years but we have not yet been able to capitalise on it and persuade private investors to put their money into economy.

The government needs to evolve a comprehensive package in this regard and the investors are expected to keenly watch the upcoming budget for the incentives to be given by the government to them.

Overseas Pakistanis have been a strong constituency for the PTI and before coming into power the PTI has been boasting that it would galvanise expat Pakistanis for the national development.

So far, the government has not taken any tangible measures to lure overseas Pakistanis to bring their money to Pakistan in a big way. Hopefully, the policy makers would be giving special attention to this sector in the budget.

Pakistan is basically an agriculture country and in previous governments not much attention was given to this sector. The farming community, which forms the backbone of the national economy, must be looking at government efforts to boost this sector.

But as widely reported that the upcoming budget would be in line with the recommendations of the IMF which maintains that primary deficit excluding debt servicing should not exceed 0.6 percent of the gross domestic product (GDP).

It means that the government has to undertake some strict and unpopular measures to meet this criterion.

The big question is that at the time when ordinary people are burdened with a high inflation, can a political government afford to cut down on subsidies. It was one of the reasons that caused delays in the finalisation of the deal with the IMF and now it would be seen how far the government had been successful in convincing the IMF about the political difficulties it could face because of such drastic measures.

All these challenges could be met if there is a national consensus on these matters. Unfortunately, when governments are in power, they plead with the rivals to evolve a political consensus on economic issues or at least come up with a solemn pledge to not to play politics on vital economic matters; however once out of power, they throw the caution to the wind.

Former finance minister Ishaq Dar has been pleading for a charter of economy to be formulated on the pattern of charter of democracy in order to forge a national consensus on critical economic matters but no one pay heed to those suggestions.

Now the present government also wants such a broad understanding among the political parties but such implorations seem to be falling on deaf ears.

In fact, the present government has not made any serious attempt to take opposition on board in order to mitigate its political difficulties.

Even some of its own allies like Balochistan National Party (Mengal) are unhappy with the government for what they believe is its failure to fulfill the promises it had made at the time of government formation.

The government is unlikely to face any difficulty in getting the budget passed from the National Assembly where its allies, even those unhappy, in all likelihood would vote for the passage of the budget.

However, it looks that political challenges are complicating for the government with each passing day. In view of grave economic situation, the government needs to vigorously act to address the political problems otherwise it would be opening up more fronts for it to fight on in future.

The writer is a senior journalist based in Islamabad