Budgeting for survival

Imran Khan is lucky he missed carrying the ignominy of having to underwrite such devastation

Truth be told, the economy would be as good or as bad as it stands under any government. IK is lucky he missed carrying the ignominy of having to underwrite such devastation. In fact, he may have only complicated matters for the state, the replacing government, and the people, by his decision to lower the prices at the pump and in electricity rates when the entire world and all the economic logic, literally, was crying to do just the opposite. Why he may have done so is a matter of conjecture — for now what matters is its implications and a persistent threat of insolvency that this country faces — but it cost the country and its people a mammoth 600 billion PKR in subsidies, levy and taxes. Keep in mind all governments earn their revenue through what are essential utilities across the social spectrum — oil, gas and electricity. Water is generally treated a free resource and is neither taxed nor priced. That we are now a water stressed nation on the verge of starvation is not a coincidence.

The Budget is premised on one and only one qualification; that the IMF will resume its stalled programme and favour Pakistan with an extension and two more billion USDs. If this one condition is not met, this Budget and the entire crucifix on which it stands shall dissolve into first chaos and then nothingness. We are already chaotic. The way this government and Miftah Ismail — carrying the cross — is so desperate for a deal you can tell how crucial and critical is this one act of appeasing IMF and securing our economic future. But what if the IMF doesn’t do the deal, should be the principal occupation of one and all in the present government. Were it to so happen we wouldn’t have seen harder times ever.

We will have no dollars to import our energy needs — oil and gas. That will put the entire economy on hold. Can friends still come to assist? They may, except that strict rationing will need to be resorted to, to only fuel what is productive and essential. We may have large tracts which just may not see a volt of electricity for days. And what about capacity payments in USDs that we have agreed to under sovereign guarantee? Even if the IPPs and power producers agree to deferred payment it will add to the Energy debt pile, already sky high. Say, they all turn angels and produce power with the free fuel that friends give us to tide through say the next three years, and say we produce to export like never before and grow crops like never before and minimise our imports to only the absolute essentials in raw material and in machinery and in articles that will help propel production, and earn enough dollars to pay our debts and survive at the subsistence level — and don’t steal from government coffers; we will still need dollars to pay for the imports to enable such face-saving productivity. I assume that the elephant in the room — retiring accumulated debt — which is around 21 billion USD for the next fiscal year is somehow and magnanimously deferred by our donors.

Look at the proposed numbers in the Budget. It has some significant parking allocations ostensibly for specified purpose but can easily be repurposed when push comes to shove. We can’t forego debt payment unless we can make our donors agree to either defer or roll over — not impossible; yet there will be some who will need to be paid out. Next big allocation is for the NFC award to provinces where most money goes. It is time to tighten some belts there and exercise better control over what and how much is absolutely essential. For the next couple of years create an exception and let the federal government directly finance those projects which are critical. General infrastructure development can wait; health and education cannot. The award may thus be tailored down to meet the absolute essential only, controlled and monitored for the next three years by the center, and not be the grant it has become. The provinces must assume the role of raising their revenue for sustaining what they already have — 18^th Amendment obligates them to do so. Provinces must produce and return any surplus that they are able to muster.

There is a 1500 billion PKR subsidy and tax relief woven into the system for the privileged elites and the moneyed of this country. It is time to renegotiate their unearned privilege and ask them to take a hit or two. In fact they must be able to contribute more in full taxation and take on the responsibility for social safety through charitable initiatives for the downtrodden and the most suppressed. Similarly, there is an 800 billion portion of the allocation for PSDP. When the choice is between food to survive and build roads and flyovers or hand-outs to parliamentarians this extravagance can be put on hold. This makes a significant number when added. Clearly these numbers are premised on borrowings but most can still be generated through local resource. In fact the Budget estimates around 52 per cent revenue from local means. If the due-outs are deferred for a year, it leaves us enough to sustain a reasonable domestic economy. If that cannot be so it is time to relearn austerity and frugality in the face of rapacious profligacy with borrowed money. For it to have effect we will need to live simply and lead by example. Produce, produce and produce — except children — and save, save and save. That should be our mantra.

And finally Defence which sees hefty allocations every year after debt and NFC payments. No doubt an assured defence is our imperative need but we sit happy with our composite capability. It is equipped to fight multiple threats and retains the requisite punch to ward off an offensive intent. We have three options: sustain what we have at the level it stands — fairly formidable; continue to add more muscle and reinforce its deterrent effect — this will need continuation of ongoing force development plans; and thirdly, simultaneously design and develop structures and capabilities for a future war with appropriate technologies and capacities. This is essentially how a force development plan is structured. Given our predicaments which pitch us between continuing development or survival it needs resort to minimum essential only in all areas which should sustain the capability and capacity as exists. We can effectively deter, face off, and respond to any adventure as a part of our basic mission. It is time to stick to it till time and tide permit more. It can save us some precious resource.

Finally, there is the case of the SOEs or the PSEs which keep sucking away 1500 billion annually in a Black Hole. A year may be too short a time to dispense some but the effort must begin in earnest to shed away these existential albatrosses which, along with debt and energy, will take us down the dreaded hole. Significant savings can accrue. It is time for the economy and mindsets to be restructured and think and act differently. It will keep Pakistan buoyant.

Published in The Express Tribune, June 17^th, 2022.

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