Thursday September 16, 2021

Mini-budget coming?

December 26, 2019

According to the Memorandum of Economic and Financial Policies (MEFP), there are at least two points that indicate a likely revision in budget targets anticipating a dreaded mini-budget in the next couple of months. Dreaded because the public is already under tremendous pressure of inflationary trends ever since the PTI government came to power in 2018. Despite repeated claims and promises that the increasing inflation and the resultant miseries of the people are temporary, such promises have largely remained hollow. Now these additional measures to achieve annual targets will surely compound the strain the public is already enduring. The revision of the FBR targets from Rs5.5 trillion downwards to Rs5.28 trillion is not unexpected. Right from the beginning, economic and financial experts were pointing to this overly ambitious target as unachievable. For example, Dr Hafeez Pasha has been loud and clear in his critique of the economic policies and fiscal targets of the government.

The same applies to the non-tax revenue targets that have been jacked up. Apparently the PTI government is trying to compensate the revenue shortfall by trying to increase non-tax revenue, meaning the FBR initially miscalculated the financial potential of Pakistan’s economy to pay taxes and now is out seeking non-tax revenues, which is not a good omen. The government too could not do much about the circular debt that still stands at Rs1, 690 billion. One reason the people of Pakistan dread min-budgets is that they invariable impose higher electricity and gas tariffs, and that is going to be additional burden on the already meagre resources the common people have at their disposal. Their disposable incomes have shown a downward spiral with the prices of basic commodities skyrocketing. The IMF has often used tariff increases as the purported panacea for economic and financial ills of developing countries.

Now, may we suggest that the government be more circumspect in its decisions and the steps it takes to disentangle the country from its economic mess. First, it needs to be careful with IMF’s new conditionalities that it prescribes just to increase revenues without any consideration for people’s plight. We have seen in many developing countries IMF conditionalities playing havoc with economies already under strain. Second, if the targets need to be revised it is imperative that for the sake of transparency those responsible for setting these unrealistic targets be held accountable. The simple question is why something that was evident from the beginning was ignored and the people of Pakistan were kept in darkness about the impossibility of achieving clearly unattainable targets.