May 29, 2022

The economic indicators of the country are not in good shape. The inflation is predicted to remain high.



he incumbent government will be presenting its first budget soon. Negotiations with the IMF in Doha will continue prior to that. It is expected that the IMF will impose strict conditions on Pakistan. In the initial round of talks, it has conveyed that it will not release any funds until petroleum prices are adjusted and subsidies on petrol prices abolished.

It is clear that the upcoming budget will depend primarily on how the negotiations go with IMF.

The economic indicators of the country are not in good shape. The inflation is predicted to remain high.

Independent economists say the outgoing PM’s energy relief package has been a factor in the runaway inflation and uncertainty as it required greater borrowing. The consumption of oil also increased for the reason that it was purchased and consumed in large quantities over speculation of increasing prices.

Some relief can still be provided in the forms of social protection programmes like the BISP and tax cuts on green energy alternatives that the IMF does not vehemently oppose. Increased spending is also likely in health and education sectors.

Experts says that there is need to focus on targetted subsidies and for removal of duplication in various categories of beneficiaries.

If the government decides to cut fuel subsidies, it should do so gradually, as an immediate increase will impose an extreme burden on the masses.

Election year budgets have almost always sought to provide relief in the form of subsidies, tax cuts and generous social protection schemes. The outgoing governments do this to appease their voters and to seek their support in the next elections. However, historically, they have failed to win the next elections despite this policy.

Pakistan has been an elitist economy. All governments are afraid of hurting the vested interests. The share of the poor in the growth dividends is nominal. The richest segment of the society gets the most benefits.

Another commonality in the election year budgets is the relaxation of all prudential rules. Hoarding of essential commodities often goes unchecked in the last year of the tenure of elected governments and the price control remains subdued.

This year it is likely that the Punjab and Balochistan will face delays in getting their provincial budgets because of constitutional hitches. Chief Minister Hamza Shahbaz has not officially formed his cabinet yet while Balochistan’s Chief Minister Abdul Quddus Bizenjo has just survived a no-confidence motion against him.