Missed budgetary targets

Governments missing its budgetary targets has become something of a political tradition.

In normal countries, the business of running the nation’s finances is often given to a highly important member of the ruling party, a person who commands the absolute confidence of the head of government. In Pakistan, however, under the previous administration and the current caretaker set-up, it seems the only reason we even appointed a finance minister is because it would look bad to have a civil servant lead what seems to be the perpetual negotiations with the International Monetary Fund.

Given the lack of seriousness about managing the country’s finances, it comes as no surprise that the annual announcement that the government is about to miss its budgetary targets by a wide mark has become something of a political tradition.

This week, for instance, it was revealed that the fiscal deficit would reach 7.6 per cent of the total size of the economy, on account of the government’s failure to curb runaway power subsidies and pressure the Federal Board of Revenue (FBR) to do its job and actually collect taxes for a change. We would express shock, but it is hardly surprising that the government has failed in its responsibility to manage its money properly.

This is now the second time in a row that an outgoing government has left in place several populist measures (it was energy subsidies last time too) in a failed bid to win re-election. But it seems that, twice in a row, the Pakistani people have proven too smart for such gimmickry.

That being said, however, spending is not the real problem. Yes, the government spends its money unwisely on subsidising today’s consumption rather than investing in tomorrow’s growth opportunities, but the actual level of government spending is not really the problem. Islamabad has a very serious revenue problem, one that needs to be tackled with ruthlessness. Until the FBR is made to get its house in order, all reform efforts will come to nought.

Published in The Express Tribune, May 30^th, 2013.