Money Matters

‘Populist’ budget

Money Matters
By Zeeshan Haider
Mon, 06, 21

Without going into the debate when the next elections will be held, Finance Minister Shaukat Tarin, for all practical purposes has given an “election budget”.

Without going into the debate when the next elections will be held, Finance Minister Shaukat Tarin, for all practical purposes has given an “election budget”.

Just a few months back, the government was hell bent on getting Tarin’s predecessor Hafeez Sheikh elected to the Senate as a gesture of confidence in his economic policies, particularly after he consented to the International Monetary Fund’s (IMF) tough recipe to stabilise the economy.

Most of those tough measures were thrown out of the window and Tarin has come up with a feel-good and pro-growth budget aimed at winning back the declining popular support.

If results of the bye elections are any guide, then the government has no other option but to take populist measures to keep public happy, which was already grinding under double digit inflation for three years in a stretch.

Only time will tell if the so-called economic turnaround will be sustainable and the IMF will buy the government’s arguments or not.

Speaking at the parliamentary party meeting, Prime Minister Imran Khan said his government has succeeded in convincing the IMF, but Tarin said the IMF told them to announce the budget and then they would continue the talks.

The fact is that it is too early to call the recent feel good stories on the economic front a turnaround. It is not the first time that Pakistan has achieved this “turnaround”. The greatest challenge for the successive governments in Pakistan has been to make these small and short-lived achievements permanent and sustainable. In the past three decades or so, these achievements could not be made sustainable.

Buoyed by the good growth in foreign remittances as well as in exports, which many analysts believe is caused by peculiar Covid-19 conditions, the government believes that it could continue with this success spree in the future too. While one would wish good luck to government, the government needs to base its complacency on sound reasons.

These achievements must be consolidated which can only be done through implementation of much-needed reforms, but it seems that like its predecessors these are not on the priority list of the present government too.

Pakistan’s creaky power sector has been yearning for these reforms for decades, but no government has dared to undertake them.

A reality check for the government came in last week when power outages staged a comeback across the country, particularly in its stronghold, Khyber Pakhtunkhwa.

The most severe criticism on the government came from its own lawmakers from the province. Speaking in the National Assembly, PTI MNA Noor Alam Khan said the previous government set up power plants to overcome the power shortages, but his own government failed to evolve a proper power distribution mechanism to plug power losses.

The PTI came into power on the slogan of “change” and it needs to break from the past to show some real change in the country.

Unlike previous political governments, it enjoys very good relations with the establishment. It provides it with an ideal opportunity to take bold steps to fix the long-standing problems faced by the country.

Apart from the power sector, our taxation system is also severely faulty. The government needs to push for the long-delayed reforms in the taxation system and revamp the Federal Bureau of Revenue (FBR).

The governments in Pakistan have been in the habit of squandering away small fiscal space they create for the sake of short-term gains as is evident from the new budget proposals, but they conveniently avoid fixing the long pending problems for the sake of long-term gains.

The government has announced a 10 percent increase in the salaries of government employees. This raise was overdue as they have not been given any relief for the past three years, but it would have been better for them if the government gave them relief by bringing down inflation, which was in double-digits for the past three years.

The most important step in this regard by the government could have been control on prices of the essential commodities like flour, sugar and edible oil. The government has yet to take any measures to launch a crackdown on mafias responsible for this artificial price hike.

The government is jubilant on the prospects of bumper production of key crops like wheat and sugar, but that will be of little interest for common people unless these commodities are available to them on affordable prices.

The government’s economic measures so far have benefited big industrialists and businessmen and these benefits have not yet passed on to small businesses and industry workers and labour class. The top businessmen and industrialists have pocketed all benefits triggered by the stimulus-driven growth and experts say it would take another six months to a year to pass these benefits to common people.

The little relief given to the salaried class gets neutralised by the imminent increase in fuel prices by the government.

Tarin has said increase in fuel prices is inevitable because of rise in the international prices as government has withheld the rise for a month and a half.

The government should keep in mind that economic woes of the country are deep rooted and they cannot be fixed through fire-fighting measures.

Moreover, these could not be addressed in a solo-fight by any government.

Recent media reports suggesting that government might be leveraging support for US military in Afghan pullout in exchange for favourable terms from the IMF should be a cause of worry.

Pakistan needs a home grown economic strategy, however painful it is, to fix its economy. Any recipe that compromises the country’s sovereignty is undesirable.

The finance minister has ruled out such possibility, but the prime minister should personally address this issue.

He himself should take the National Assembly into confidence on the talks that are going on with the IMF as well as on security matters with Washington in the wake of US troops’ withdrawal from Afghanistan by 9/11.

Any link between the two would be a sign of weakness and vulnerability of Pakistan, and the government needs to put these fears at rest.

The writer is a senior journalist based in Islamabad