External borrowing funds economic growth
Sources said that the IMF was building its case on the assumption that growing imports - a key source for the exceptionally good tax collection - would eventually slow down. Photo: File
Economic Advisory Group Chairman Javed Hassan, while questioning the credibility of the new budget, has pointed out that most of the economic growth will be funded through external borrowing.
“Budget was announced during negotiations with the IMF (International Monetary Fund). This can put Pakistan in an extremely onerous situation as much of the growth is funded through external borrowing,” he remarked.
He was speaking at an interactive post-budget roundtable organised by the Policy Research Institute of Market Economy (PRIME) and EAG on Monday.
Hassan also sought clarity on how the budget targets of provincial surplus, petroleum levy and gas infrastructure development cess (GIDC) would be achieved.
“In a democracy like Pakistan, awareness should be created among the public to make them understand financial constraints and get them prepared to counter the situation.”
He emphasised that if Pakistan failed to revive the IMF programme, the government was likely to face greater public outrage compared to the situation when it had to implement the budgetary measures necessary for reviving the programme.
PRIME Executive Director Ali Salman appreciated the government’s initiative for the reversal of tax and subsidy-related incentives proposed for the construction and real estate sector.
“There has been a long discussion on unproductive investments in the real estate sector, and taxing them can encourage entrepreneurship and investments,” he said, adding that the government intended to broaden the tax net, but it should follow a different policy approach.
Pakistan Institute of Development Economics (PIDE) Chief of Research Dr Idrees Khawaja called the new budget a “price-pass-on-to-the-consumer budget”.
“There is a need for sensitivity analysis during preparation and before formulation of the budget. Drastic expenditure cuts could have been proposed by the government rather than passing the burden on to consumers,” he added.
Friedrich Naumann Foundation Project Manager Aniqa Arshad highlighted the significant increase in the government employees’ salaries at the cost of common people.
“Like previous budgets, the government has not come up with better solutions for the loss-making SOEs (state-owned enterprises) except for financing them.
Published in The Express Tribune, June 14th, 2022.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.