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How Pakistan’s new budget fails to address key areas of concern

Rustam Shah Mohmand discusses the shortcomings of the recently announced budget. According to him, the government didn't allocate sufficient resources to certain key areas that needed attention.

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Pakistan’s new budget –the third of the PTI government– was unveiled by Finance Minister Shaukat Tarin on June 11 in the National Assembly. This budget has assumed unusual importance because the pandemic has had a devastating impact on the economy. Long lockdowns, the closure of businesses, disruption of trade, huge increases in unemployment, declining incomes, and rising poverty has caused deep despair.

Against this backdrop, people were expecting substantial relief in the proposals for the next financial year starting July 1. Understandably, the task before the government was by no means easy, considering the meager resources it could generate in an environment of grossly diminished opportunities for investment, tax collection, foreign aid, etc.

An attempt was made however to bring about a balance in resource generation, developmental priorities, allocation of defense, and the share of provinces.

Read more: Budget 2021 and the whines of fading hopes

The gross federal revenues are pitched at Rs7.9 trillion while the total expenditure is estimated to be Rs8.4 trillion. Debt servicing will account for Rs3.06 trillion. The deficit will be 6.3 percent of GDP.

Many issues forgone?

The new budget does not provide adequate incentives for increasing exports— a key area of concern to planners. The country continues to rely on agriculture for sustaining vast rural communities but no real effort has been made to produce such high-value products such as saffron, olives, mushrooms, figs, etc for exporting to Middle Eastern countries.

The new proposals also do not lay out a comprehensive plan for dealing with the effects of climate change. Pakistan is one of the most water-stressed countries in the region. But there is no real plan to combat the menace of carbon emissions, floods, pollution, and food insecurity in the future.

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

Defense allocation has been shown in the budget as Rs1.37 trillion. But this does not include a sum of Rs360 billion that will be drawn from the civilian budget for payment of pensions to retired military personnel. The allocation also does not include expenditure on nuclear weapons etc that are not disclosed for reasons of security.

The exact allocation on defense is therefore much more than the figure revealed in the budget. Figures in the budget show expenses planned to be incurred on the armed services constitute 16 percent of the total outlay of the budget. That is 2.54 percent of GDP. The actual figure, however, will be much higher.

Lack of resources

One wonders whether such a huge allocation has any merit considering growing poverty levels both in rural and urban areas because allocations provided by the government are not the only means of revenue for defense personnel.

One important area that appears to have received little attention is vanishing farmland— the backbone of the economy. Huge slums of housing colonies, commercial blocks, markets are springing up all over the country along all major roads and highways. These are unchecked, uncontrolled encroachments on farmland. This, added with more drought, more floods, and more erosion will imperil any scheme aimed at guaranteeing food security in the future.

Windows of opportunity have been opened for mostly poor or lower-middle-class people. The government will give interest-free loans to deserving poor families, to help them set up businesses. To overcome the shortage of houses, loans will also be given to those who meet eligibility criteria. Health cover facilities will extend to every family. This is a major initiative.

Read more: Did PTI present a pro-people budget?

Within the constraints imposed by a lack of resources and the need for security in the prevailing scenario, the options of the government were indeed limited. But the real turnaround in the economy is only possible when relations with India begin to improve.

Normalization will not only result in reduced allocations for defense but will create conditions for the growth of bilateral trade between India and Pakistan. According to the World Bank, the potential value of bilateral trade between the two countries is more than $45 billion.

Human resource development is a critical area of concern for a country like Pakistan. A huge and growing population will need to be harnessed as a means of alleviation of poverty, which remains a major issue and will need more attention in the coming years if a major disruption in the socio-economic fabric of the country is to be avoided.

Rustam Shah Mohmand is a specialist of Afghanistan and Central Asian Affairs. He has served as Pakistan’s ambassador to Afghanistan and also held position of Chief Commissioner Refugees for a decade. The article originally appeared at Arab News Pakistan and has been republished with the author’s permission. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.

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