Between promises and expectations

The last budget of any government is usually constructed around a grand scheme to get re-elected and not to fix some, if not all, the things that are wrong with the national economy. With that larger aim in sight, the ruling Pakistan Muslim League-Nawaz appears to have released its budget proposals for the fiscal year 2017-18. The proposals have everything to do with magnitude and scale (and size does appear to matter here) — government spending, for instance, is expected to rise to Rs5.19 trillion while the revenue goal has been set at Rs5.31 trillion. Never mind that the previous revenue target fell well short, it has somehow been projected that the tax revenue would be expanded in 2017/2018 to Rs4.33 trillion from Rs3.83 trillion. Then the trillion-rupee threshold will be crossed for the first time for the development budget in the next fiscal year, reflecting a 25pc increase over the previous year. The allocation for the defence budget has been increased to Rs920 billion from the previous year’s figure of Rs860 billion.



Finance Minister Ishaq Dar reckons that Pakistan will be one of the largest economies by 2020, thanks to an extraordinary turnaround that began four years ago — the period coinciding with the incumbency of the PML-N government. Drawing on figures released by the latest Economic Survey of Pakistan, Mr Dar said the country had posted 5.3pc growth in GDP in the last fiscal year which is supposed to be better than the global average growth rate. Such a rosy outlook is seemingly boosted by further improvement seen in foreign exchange reserves and reduction in power cuts for industries. Within the next few months, Mr Dar said, he expected the government to add 3,600MW of electricity to the national grid. Through additional reforms in the energy sector, the government may eventually boost the national grid by 10,000MW. In the future, Mr Dar says there is scope for increasing the capacity of the national grid by an unprecedented 15,000MW.

The finance minister counts as a major success his government’s ability to wean the country off the habit of loans — which were taken for development expenditures and other expenditures but created extraordinary burden on the state’s finances. Budget documents show that the government intends to achieve an investment to GDP ratio of 17 per cent; similarly, it hopes to restrict the rate of inflation to less than six per cent. Other targets such as keeping the fiscal deficit to well under 4.1% of GDP may be difficult to achieve. The minimum wage for unskilled workers has been increased from Rs14,000 to Rs15,000 but will the government also ensure that the same in enforced in all sectors. The finance minister announced that Rs121 billion would be allocated for the Benazir Income Support Programme, a three-fold increase from the 2013 budget. Now the number of families covered by the BISP will increase to 5.5 million from 3.7 million. This also means that another 1.3 million children will be facilitated through the programme.

For consumers at least 400 imported items, including cosmetics, cell phones, cigarettes, imported drinks, auto parts and electronics, will become more expensive through an additional levy.



The finance minister has promised a 40% government guarantee on loans of up to Rs10,000 from banks and other financial institutions in an effort to ease the present housing shortage in the country. A sum of Rs180 billion has been earmarked for CPEC-related development projects in the country, some Rs44 billion alone will be spent the western route of CPEC. The allocation for the health sector has been set at Rs49 billion. The federal government intends to spend five billion rupees on the reconstruction and rehabilitation of damaged infrastructure in the Federally Administered Tribal Areas.

A lot of promises have been made but as some of our economists warn budget documents are often too loosely implemented. And there are too many slips between the cup and the lip.

Published in The Express Tribune, May 27^th, 2017.

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