Budget? What budget?

Expect the budget speech to invoke emotions over the floods, the damage, and how our reserves and exports have grown.

Khurram Husain June 01, 2011

If ever a budget presentation was a ritualised performance and little more, then this is it. After all, what’s the point of presenting a budget that has already leaked, that everyone knows is going to be amended within weeks of being ‘unveiled’, that has been prepared in a ramshackle haste like one of those papers one wrote in an all-nighter during sophomore year?

Here are some things you can expect the finance minister to go on and on about during his 45 minutes before the Assembly. First and foremost, expect lots of tear-jerker words about the floods, about how much damage they wrought, about what a huge challenge they were for the country and about how many people were displaced and watched their belongings swept away.

Then expect lots of uplifting rhetoric. Expect invocations of how the floods, terrible and damaging as they were, brought us all together, proved to us how we stood nobly together, shoulder to shoulder, in the hour of our trial. Expect maybe a line of verse at this point, perhaps the one by Iqbal exhorting the eagle to not fear the headwinds, “for it is there only to take you higher.”

If you could roll some of these words in a piece of Rizla paper and smoke them, you might yet figure out exactly what the finance minister means, and why they’re there in a budget speech. Words of this sort aren’t meant to be listened to, they’re meant to be smoked, to really extract their meaning and import. What exactly was the fiscal impact of the floods? On the revenue side, one would need to be a little higher than the proverbial eagle to figure out how the revenue slippages of the outgoing year are connected to the floods.

Expect some talk of how we have bravely weathered an adverse international environment, how our reserves are strong, our exports unabated. Expect, maybe, a humbling and theatrical tribute of the ‘blood, sweat and tears’ variety, to the sacrifices of our brave and hard-working farmers who have sown the cotton that feeds our industry and harvested the wheat that feeds our stomachs. If your stomach churns while you hear this, take heart, your industry has been churning too.

But what exactly do our reserves have to do with the economic management of the country? A rare and sudden spike in the international price of cotton has buoyed our exports, for sure, and our remittances have been rising like that plant in Jack and the Beanstalk. But the international economy is the ogre that sits on the end of this rising spiral that has some of us giddy.

You see, the international economy has a way of snatching away with one hand what it has handed out with the other. Salman Shah found this out when he boasted too much about the “nine billion dollars” of foreign investment that came into Pakistan in 2006 or so, right as the international market was priming its pump for the oil price spiral that would send reserves plummeting around the world. There is ‘no free lunch’ in this world, and I don’t apologise for invoking this pedestrian cliche. Those who don’t figure out the basic facts of life are doomed to a life of cliches. Our reserves do not spring from the strength of our loins please, they are another ‘manna from heaven’ that has dripped into our coffers, and if you listen carefully you can hear the sound of 17 billion dollars laughing hysterically when you walk through the corridors of the State Bank building.

Expect to hear very little, if anything, in connection with the budget. You’ll hear no new tax initiatives except for more of the same, although it is unlikely any of the new revenue measures will get much play during the speech. You’ll hear lots of the goodies the government intends to hand out, because it believes in the poor and so on, but very little on where the money will come from to pay for them. You’ll hear lots of words, but very little substance. And at the end, you will ask yourself: Budget? What budget?

Published in The Express Tribune, June 2nd, 2011.


Haider Hussain | 11 years ago | Reply @Meekal Ahmed: I think these two are different things. See, reserves in weeks of imports gives you a holistic view about the strength of reserves. But the ratio I suggested takes you one step ahead and gives you an idea about the compositional strength of your reserves (i.e. buildup of reserves due to debt flows or income&investment flows?).
S. Khalid Husain | 11 years ago | Reply 'Prepared in ramshackle haste like one of those all nighter papers one prepared in sophomore year' - you bet. First the US, Saudi, EU and other aid and loans, then the IMF, ADB, WB, and other loans, were projected. Then all the other unearned revenue. From this projected total the expenditure was deducted, the balance became the revenue target. Next, there was brain storming session on how to maximise the aid and loans.It came down to comprimising soverignty, the more this was compromised the more the aid, particulalry from the prime doner.A measure of compromise was determined. All above would change by the week as the budget is changed and amended, partly for own reasons but mainly to adjust to new demands from the providers. Tax on agriculture? Improved and effective tax collection including punitive measures against the known big fish amongst the evaders? Forget it, the shrimps haven't learnt to whistle yet. Tbora Karachi
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