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Sunday December 05, 2021

Bluff or policy?

July 04, 2021

A bluff is “an attempt to deceive someone into believing that one can or is going to do something.” A policy is a “course or principle of action adopted or proposed by an organisation or individual.” In the “card game of poker, a bluff is a bet or raise made with a hand which is not thought to be the best hand. To bluff is to make such a bet. The objective of a bluff is to induce a fold by at least one opponent who holds a better hand.”

Bluff number 1: Budget 2021-22 – Tax Revenue (FBR) of Rs5,829 billion. According to the FBR, it has collected Rs4.7 trillion in the outgoing fiscal year. Can the FBR collect a wholesome 24 percent more next year, especially when the Ministry of Finance claims that there are going to be ‘no new taxes’? For the record, the FBR would need to collect a colossal Rs1,100 billion more than last year in order to meet the new target. Is there a policy, course or principle of action that has been adopted or proposed by the Ministry of Finance to reach the new target? Is the Ministry of Finance bluffing? Are we attempting to deceive someone other than ourselves?

Bluff number 2: Budget 2021-22 – Estimated Provincial Surplus of Rs570 billion. The budget is expecting that the budgets of the four federating units will have a surplus of Rs570 billion. Here’s the record: Punjab’s surplus budget of Rs125 billion; Sindh’s deficit budget of Rs25 billion; Khyber Pakhtunkhwa’s balanced budget; and Balochistan’s deficit budget of Rs84 billion. That converts to an accumulated surplus of Rs16 billion as opposed to a surplus of Rs570 billion in the federal budget. Is the Ministry of Finance bluffing? Are we attempting to deceive someone other than ourselves?

Bluff number 3: Budget 2021-22 – Privatisation Proceeds of Rs252 billion. The Ministry of Privatisation under its ‘Active Privatisation Program’ has the following entities at the top: Balloki Power Plant, Haveli Bahadur Power Plant, SME Bank Limited, First Women Bank and Services International Hotel. Which one of these is actually going to be privatised in the following 12 months? Where are we going to get Rs252 billion from? Do we really have a policy, course or principle of action adopted or proposed? Is the Ministry of Finance bluffing? Are we attempting to deceive someone other than ourselves?

The above three bluffs would mean a fiscal deficit that is much higher than the one shown in Budget 2021-22 – higher by around a thousand billion. Worryingly, the trade deficit for FY21 has clocked in at $31 billion up from $23 billion last year. Economic literature has it that “budget deficit has negative and statistically meaningful effect on current account balance”.

There are three serious concerns: fiscal deficit, circular debt and trade deficit. Can we really bring down the growing circular debt without increasing the tariff? Magic? Is the Ministry of Finance bluffing on all three? Do we actually have a policy, course or principle of action to address any of the three? The exponentially rising trade deficit will sooner or later turn into a currency crisis, as it always has. How far are we from twin deficits – and back to the IMF? What will the new IMF programme look like?

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com Twitter: @saleemfarrukh