‘Budget lacks creative thinking to address economic challenges’

Islamabad : The government can only improve its revenue side by creating an environment conducive for economic activity especially in the current unprecedented challenging external and internal circumstances. However, the budget presented by the federal government shows severe lack of any well-thought-out approach in policy- and budget-making in the turbulent times Pakistan is faced with.

These views emerged during a webinar organised by Institute of Policy Studies (IPS) on the 2020-21 federal budget here.

IPS executive president Khalid Rahman said the country was experiencing extraordinary circumstances and in this situation some innovative ideas were expected in the proposed budget.

"Addressing the economic challenges the country is experiencing needs out-of-the-box thinking to boost revenue generation," he said.

The IPS executive president deplored that the country’s actual problem was governance deficit, which was going from bad to worse.

“Examples of this can be seen in the petrol shortages and healthcare issues during the pandemic,” he said.

Economic policy analyst Zaheeruddin Dar expressed concern that a 27 per cent increase in FBR revenue was unrealistically expected in the budget.

He said the FBR tax collection target had been set at Rs4.963 trillion, while the revised estimate of the closing year was Rs3.908 trillion.

"In the current situation, even collecting Rs3.5 trillion would be a miracle," he said.

The expert said all FBR revenues were consumption related including sales tax and customs duty.

He said tax collection would not increase without generation of economic activity.

“More revenue cannot be collected just by hiking tax rates,” he said.

Zaheeruddin Dar said over the years, Pakistan had not invested in those sectors that could generate additional revenue.

Former water and power secretary Mirza Hamid Hasan seconded Dar's point saying the government has projected a 27 per cent increase in tax revenue collection next year without any changes in the tax structure or collection system.

Discussing the pressures in which the current budget has been made, chief macroeconomics at the Planning Commission Zafarul Hassan Almas said the financial constraints could be seen in the federal budget and how the government aimed to support growth with a large fiscal deficit was beyond comprehension.

Senior research fellow at IPS Syed Muhammad Ali said Pakistan should collaborate with other countries affected by locust swarms to make provisions in a more effective way during budget-making.

Former ambassador Tajammul Altaf said the size of the COVID-19 budget had been set at Rs7.137 trillion of which 41 per cent would be spent on repayment of loans and 12.7% on defence, which was more than half of the total.

He said unless there was a concerted effort to reduce loans, even the best budget-maker in the world would not be able to move things in the right direction.

Former DG of the International Institute of Islamic Economics, International Islamic University, Dr Atiquzzafar Khan and Assistant Professor of the Quaid-i-Azam University Dr Anwar Shah also spoke on the occasion.