Thursday April 18, 2024

An ordinary budget

By Khalid Bhatti
June 19, 2020

Extraordinary situations demand extraordinary responses. We are facing an extraordinary situation due to the Covid-19 pandemic, the current economic crisis and the locust attacks. The government has to fight on three different fronts.

Covid-19 led to an unprecedented public health crisis and aggravated the already existing economic crisis. Even though the government denies the existence of such a crisis in the economy before the outbreak of the coronavirus. We were dealing with these two crises when the locust infestation and attacks started to spread.

The locust attacks pose a serious threat to agriculture in many areas in the country. According to the Economic Survey of Pakistan 2019-20, agriculture was the only sector of the economy which experienced some growth. This locust situation could create a food crisis if not controlled quickly.

So there were some hopes that the government would address these burning issues and put forward some sort of solutions. It is really disappointing to see that the government instead presented a budget that was more business as usual than one that addressed these serious situations. Instead of creative thinking and new policy measures, the PTI government decided to stick with conventional thinking and traditional neoliberal policies.

There were expectations that the government would introduce policy measures in Budget 2020-21 to rescue the economy from the most serious economic crisis Pakistan has faced in the last six decades. The expectations were that the government would take measures to boost demand to increase production and growth.

Contrary to these expectations, the economic team of the government comes up with a traditional budget without taking extraordinary measures and policy decisions to address the extraordinary economic and social situation.

It is a typical and traditional budget prepared within the framework of IMF conditionalities. Any government under an IMF programme has very limited room to maneuver. IMF officials not only participate fully in the preparation of the budget but also insist on certain policy decisions.

Traditionally, the IMF insists on reducing deficits, subsidies and carrying out structural reforms. Every major policy decision and measure needs the consent of the IMF. Just take the issue of the increase in the salaries and pensions of government employees. The IMF opposes the increase and the government agrees to it. So government employees and pensioners were left high and dry.

The budget had been prepared without any serious intent to address the several grave issues in the country, from negative GDP growth to the decline in large-scale manufacturing and rising unemployment and poverty.

There are no clear strategy and policy measures outlined to spur growth and generate employment. Economic revival is the number one issue at the moment. This budget might not help revive the economy and pick up growth as required.

Like the past budgets, major allocations have been made for debt servicing, defence expenditures and running of the government; 41 percent of the budget has been allocated for debt servicing, 18 percent for defence and around 10 percent for administration.

The government is following the same economic policies that previous governments implemented while in power. The problem is that the current government is expecting different results from the same policies. We are in a mess because of these flawed policies. But the PTI government wants to bring change on the basis of these flawed policies.

Ordinary people have no interest in the jugglery of figures and technical aspects of the budget. They wanted to know how the government is going to reduce inflation and increase their incomes. This budget will not address the both.

They are always interested to know how the government will generate employment and economic opportunities. In this budget, the government has pinned hopes in the private sector to generate employment. But in a crisis situation, there will be hardly new investments from local investors.

Businesses and industries are in survival mode and it will take time before businesses and production start to grow and generate employment. Millions have already been made unemployed by this crisis. Budget 2020-21 failed to address this issue.

The coronavirus crisis will be used to further bring down wages in the private sector. As experienced in the past crises, the capitalist class will simply transfer the burden of this crisis on to the shoulders of working people.

Like every government, Federal Minister for Industries and Production Hammad Azhar, while presenting the budget, praised the policies of his government and criticised previous governments for the economic mess the country is facing today. It seems that the government is still not ready to accept the facts and come out from its state of denial.

The budget gives the impression that the government is following the traditional rhetoric and notion that the private sector will lead growth and provide employment. But the fact is that the private sector does not seem interested in investing heavily this year.

That means the economy will remain in a negative growth zone and more jobs are going to be lost. The crisis situation demands leadership from the government. The government through public investment should start public development, infrastructure and social projects and programmes. These projects and programmes could then create jobs and spur growth.

The real impact would have been felt if the government had given relief to the average citizen. There was no wage and pension increase for government employees and pensioners. The government even made cuts on the subsidies provided on food and power. The 23 percent cut was made on the subsidy provided to the poorest sections of society. These cuts will directly affect the lives of poor people. The fact is that the government failed to provide any major relief to the people.

The writer is a freelance journalist.