Last week, the federal government presented its budget for the fiscal year 2021-22. The budget is expansionary — slightly different from the previous two budgets, which were contractionary. There are two main reasons why the government presented an expansionary fiscal policy.
Firstly, history proves that contractionary budgets have failed miserably to bring about desirable results. Secondly, the 2023 elections are around the corner, so it is the right time to attract and detract disillusioned, disappointed, and dejected voters. By the look of it, the budget seems to be growth oriented, and the government is claiming that it will help pave the way for “sustainable growth”. We all know that a mere budget policy is not enough because sustainable growth depends heavily on political stability — a milestone yet to be achieved.
The success of this budget directly hinges on FBR efficiency, relationship with the IMF, and direct or indirect support from foreign allies. If the FBR fails to collect Rs5.829 trillion, then it will be a nightmare for the current government to cope with. Moreover, the relationships with the IMF seems strained because the government rejected their recent proposal which stated a high tax on electricity amongst other things.
If, somehow, all these circumstances luckily come together in favour of Prime Minister Imran Khan, it could just prove to be the turning point in Pakistan’s history. Let us not forget that a lot of effort still needs to be made in order to truly turn our economic condition around.
Published in The Express Tribune, June 18h, 2021.