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Friday, May 26, 2023

Budget 2021 and the whines of fading hopes

Rafiq Jan thinks that this year's budget was announced in haste without doing substantial homework. This year too, the emphasis seems to be more on verbosity and demagogy instead of sharing the burden of an already squeezed working-class majority of citizens.

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Another budget for Pakistan has been released by the PTI government. Three years in power and three finance ministers tried to maintain the precision by which a subservient nation appeases the usurers about its eternal honesty in compliance.

This year too, the emphasis seems to be more on verbosity and demagogy instead of sharing the burden of an already squeezed working-class majority of citizens.

Read more: Here is a summary of Pakistan’s budget for fiscal Year 2021-22

Finance has never been my cup of tea but listening to the old song on new tunes years after years, has given me enough insight into what a typical third-world country’s budget may look like.

Vague policies viz a viz IMF narrative

A recent statement by the visiting IMF mission chief Ernesto Ramirez Rigo is a grim reality of Pakistan’s lackluster and dubious handling of affairs. He said, “Pakistan is facing a challenging economic environment, with lackluster growth, elevated inflation, high indebtedness and a weak external position, the result of a legacy of uneven policies.”

The Pakistani side has no clear answer to all those plausible reservations. The government machinery is still busy squandering taxpayers’ money in defending itself on the media talk shows each day.

Sadly, this budget too was announced in haste without doing substantial homework. Shaukat Tarin is the 3rd Finance Minister in three years of PTI government who took charge only a few weeks ahead of budget. His predecessors took the portfolios with high hopes and haughty claims to fix the gaping holes in the financial system. They too fell on their faces and had to stand down to give way to their follower. Mr. Tarin has compiled and declared the budget of 2021-2022 for Pakistan and perhaps waiting for his fate to be decided soon.

Read more: New finance minister promises economic growth

IMF has its reservations with the Pakistan government, and it objected to the non-implementation of tax and power tariff hike in this budget. The bickering never ended since the last approval of $6 billion. Pakistan appears to have fallen short of achieving the target agreed with the fund as the Petroleum levy, elimination of tax exemptions, and most importantly the financial drain is in billions of dollars each year without any record or the government’s control.

Unfortunately, Pakistan’s tarnished image coupled with persistent diplomatic affronts since 2008 contributes much to the ongoing debacles. Our government’s fickle and vague policies were aimed to deceive the naïve citizens by offering lollipops.

IMF is confident Pakistan has no other choice than to hike the power tariff and the POL levy from July 1, 2021. The Pakistani version of the arguments says the PM will decide about the hike in tariffs. It appears as the government is playing a hide and seek game with the people of Pakistan by proving its cluelessness on all fronts.

Read more: Govt to withdraw corporate tax exemptions to comply with IMF’s conditions

Another irresponsible claim?

According to IMF, Pakistan is obliged to implement the already agreed-upon measures. The finance minister yet again reacted to this claim irresponsibly, saying the Fund must look at the target achievement instead of being fixated on the ways to achieve it. Another foul attempt to mislead the nation.

SAPM Dr. Masood Khan hinted at an existing deadlock between the government and the IMF over certain conditions requiring implementation to enhance revenue collection. If true, this shows the urgency of the government to float the budget in public without reaching an amicable agreement. This also highlights the rogue financial planning that leaves in numerous gaping holes. He moved on further saying;

“If the deadlock persists, the talks between both sides will continue after the budget. And the government will have some time to include the amendments as well.”

Read more: SAPM – more than a buzzword?

The next fiscal year’s revenue collection target has been set at 5.829 trillion, and the IMF has been briefed. The POL levy has already been decided to prop up to 20/25 per liter. Taking the current RP 5 per liter, this will encumber the working middle and poor class with an additional 400 to 500 percent of the hike.

The honorable minister has already calculated the current budget on the expected foreign remittances of NRPs. A glaring example of counting the chickens before they hatched.

Whooping inflation, unemployment, and poverty

Inflation is picking up across much of the developed world as they tend to emerge from the lockdown. But the stark reality about the developed and the third world leadership lurks in the national policies.

Leading countries like America, Japan, Europe, Australia, New Zealand prioritized stimulus and vaccination drives. Their economies bounced back quicker than the rest of the world, thanks to their national action plans. US saw the fastest GDP growth in the first three months of 2021. But those are the world’s leading economies run by think tanks and strong leaders.

The government admits it failed to achieve the proposed 2.3% economic growth rate in its 3rd year. They also accept the reason was not the coronavirus, but uncontrollable inflation and interest rates. So covid19 had no significance for plummeting economy.

Read more: SBP to hold rate as economy battles inflation and COVID

The unemployment rate was 5.8% before the PTI takeover. Unfortunately, after their 3rd year, it jumped to 8.5%, as per the ministry of planning and development.

The intended GDP growth rate of 2.3% for the next fiscal year will be equal to the population growth rate. Hence the unemployment will further go up in the coming years.

The biggest losers when inflation rises are poor because they spend so much on their meager income on necessities. They do not have anything to cut back on. When inflation goes up, the rent, food, and transportation all rise at once. On the contrary, the high government spending and mounting deficits drive inflation higher that further adds to the miseries of the poor working class of citizens.

Read more: Poor and the rich in Pakistan are living ‘poles apart’: UNDP report

The tourism-dependent economies like Malaysia, Indonesia, the Philippines, Cambodia, and Vietnam were hard hit since early 2019. Demand for Palm oil from Malaysia, metal from Indonesia, textile manufacturing from Vietnam, Cambodia, and the Philippines fell sharply. They desperately look forward to the herd immunization of citizens to begin the recovery path.

Pakistan’s exports have always been behind the target over many decades. It never had any world standard tourism industry as compared to many Southeast Asian neighbors. Hence the pandemic impact on Pakistan was almost negligible. Blaming covid-19 for the falling economy is an unrealistic and ridiculous ploy used by the government for dodging the issues.

Read more: Pakistan’s blame game and ways to end it

Dependency on loans

Pakistan is among the countries that never learned to live without foreign loans, despite a wealth of resources like seaports, brimful rivers, an enviable agriculture industry, an array of unending renewable energy avenues, four seasons, and most importantly a huge repository of manpower.

Unfortunately, it counted on the IMF and WB loans and the financial aids from rich world powers for its survival. But in pursuit of that abject lifestyle, it lost its identity in the amity of nations.

Read more: Pakistan’s Economy: long term direction?

Pakistan desperately needs a thoroughbred veteran economist of Dr. Mubashir Hassan’s stature who can bring back the glories of our yesteryears. Being a longtime party hardcore, a close associate, or a part-time technocrat is not a prerequisite for a financial portfolio. Maybe we will need both to create a turnaround.

The author is an Aeronautical Engineer and a current affairs analyst. He can be reached at: rafiqjan222@yahoo.co.uk.The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.