The Budget and a ‘mini’ Budget? News Analysis

ISLAMABAD: Friday’s annual budget came with one visible certainty – that the authorities are set to return to the drawing board for a future ‘mini’ budget as Pakistan enters a potentially tumultuous new financial year next month (July).

In his budget speech, minister Hammad Azhar’s renewal of promises for leading Pakistan towards a ‘naya’ or new Pakistan, were clearly out of sync either with the present day realities across the country or the government’s own track record.

A target of approximately Rs4,900 billion in tax collections for the next financial year has not only marked a staggering rise of over 27 percent beyond this years’ collection.

It marks an uphill battle seldom seen before, notably in the midst of an economic downturn that has eroded Pakistan’s outlook in recent times. Meanwhile, other parts of Prime Minister Imran Khan’s economic track record have together left many Pakistanis clearly unnerved.

When Khan’s government arrived in 2018 to take charge of Islamabad, novel ideas to fix the country’s rudderless economy sparked a popular sense of hope for a new beginning. Though the crisis presented by the spectacular current account deficit at the time endangered Pakistan’s wellbeing, the primary solutions presented to the public earned instant popularity.

The luxury cars placed on auction in central Islamabad or the promise of turning the Prime Minister House in an educational institution were presented as the keys to resolving Pakistan’s riddle of continuing economic slide.

But just two years later in the midst of the coronavirus and a year after Pakistan embarked on an IMF loan programme, the economy is clearly surrounded by multiple and fast mounting challenges. Across the grassroots, there are a few indications of popular optimism for the future.

At the heart of the dilemma presented by Friday’s budget lies the mismatch between a widespread economic slowdown and an ambitious target for future tax collections to tackle a woefully out of control budget deficit.

Some of the ideas brought forward such as raising duties on double cabin pickups or higher rates on tobacco and energy drinks to name just a few items, are far too modest to make a sizeable difference. In fact, raising taxes on any class of automobiles as the auto industry across Pakistan remains in crisis as car sales plummet, remains incomprehensible.

Minister Azhar’s promise of delivering a ‘tax free’ budget notwithstanding, the added target for next years’ collections unveiled an uncomfortable truth. Without necessarily naming new tax heads, Pakistan’s budget makers have slapped the country’s mainstream with a series of added burdens.

In this generally bleak outlook, the allocations for the agriculture sector which is the only part of the economy that has recently recorded growth, smelt of a poor appreciation of priorities. In the past year, all sectors of the economy have contracted except agriculture, leaving Pakistan’s rural dwellers with a very modest ray of hope for their future. This emerged in spite of the failure of the large cotton crop and under performance of other key crops.

The trends surrounding agriculture must be seen within the background of a year when Pakistan witnessed a clearly powerful consequence of food insecurity haunting the country. With riots across Pakistan in late 2019 and early 2020 following shortages of sugar and flour, the fallout from the failure of agriculture policies was much too visible to be ignored.

Beyond the numbers crunched for Friday’s budget, some of Pakistan’s most urgent challenges remain unattended. In recent days, a proposal to lay off more than eight thousand employees of the Pakistan Steel Mills has presented the Khan government with unprecedented noise from Pakistan’s opposition leaders.

It is clear that the continuous financial bloodletting from Pakistan’s public sector companies is much too dangerous to be ignored. At the very least, the annual combined losses from the public sector together account for one percent of Pakistan’s gross domestic product (GDP) though some economists claim a higher number.

The exercise to end the public sector losses is both complicated and difficult, given the resistance likely from well entrenched unions and other vested interests. It is an exercise that is unlikely to make a bold headway unless Prime Minister Khan can forge an unprecedented unity with Pakistan’s main opposition parties to build a fresh national consensus on this vital front. But with his refusal to open a dialogue with opposition leaders even in the midst of Pakistan’s worst economic crisis, the future is set to only look bleak.