Lost in between
The finance minister has taken a risky path of simultaneously achieving economic growth and stabilisation
Days before introduction of the second supplementary budget in less than five months of the PTI tenure, hype had been built that this time the budget would not only address the immediate economic challenges but would also give long-term direction to the economy.
This buildup was consistent with the finance ministry’s own assessment that additional tax efforts equal to half percentage point of GDP had to be undertaken for fiscal consolidation.
But the path chosen by Finance Minister Asad Umar in his second supplementary Finance Bill is not the one that could address these challenges and instead it may rock the economic boat.
The finance minister has taken a risky path of simultaneously achieving economic growth and stabilisation. He has ignored the fact that the budget deficit in the first half of this fiscal has increased to Rs1.1 trillion. It was more surprising to see him giving tax breaks to sectors that do not matter in real economy.
The dole-outs have been given at a time when the minister himself has warned the federal cabinet in recent weeks that the trend in expenditures suggested that the budget deficit could even breach the last fiscal year’s level. The current account deficit picture for the first half is also not as rosy as painted by the State Bank of Pakistan and finance ministry. It seems the government has lost somewhere between economic stabilisation and taking populist measures and the result is more confusion.
Pakistan’s fiscal woes would not ease and this is also admitted by the government, but only behind closed doors. The finance ministry’s internal assessment showed that the budget deficit may still remain at 6.2% of the size of national economy or Rs2.4 trillion in the current fiscal year. The government needs to come out of its state of denial and should take difficult decisions by fully acknowledging the gravity of the situation.
This buildup was consistent with the finance ministry’s own assessment that additional tax efforts equal to half percentage point of GDP had to be undertaken for fiscal consolidation.
But the path chosen by Finance Minister Asad Umar in his second supplementary Finance Bill is not the one that could address these challenges and instead it may rock the economic boat.
The finance minister has taken a risky path of simultaneously achieving economic growth and stabilisation. He has ignored the fact that the budget deficit in the first half of this fiscal has increased to Rs1.1 trillion. It was more surprising to see him giving tax breaks to sectors that do not matter in real economy.
The dole-outs have been given at a time when the minister himself has warned the federal cabinet in recent weeks that the trend in expenditures suggested that the budget deficit could even breach the last fiscal year’s level. The current account deficit picture for the first half is also not as rosy as painted by the State Bank of Pakistan and finance ministry. It seems the government has lost somewhere between economic stabilisation and taking populist measures and the result is more confusion.
Pakistan’s fiscal woes would not ease and this is also admitted by the government, but only behind closed doors. The finance ministry’s internal assessment showed that the budget deficit may still remain at 6.2% of the size of national economy or Rs2.4 trillion in the current fiscal year. The government needs to come out of its state of denial and should take difficult decisions by fully acknowledging the gravity of the situation.