Misguided austerity

Cutting back government expenditures is not necessarily a bad thing. In the long run, it is absolutely necessary to keep government expenditures within limits that the tax revenue base can support. But in Pakistan, we like to pursue a fool’s version of austerity. Every time the government needs to decrease spending to maintain fiscal balance, the cuts come, not from the current consumption in the form of subsidies and other goodies that politicians like giving away, but from the development budget. As this newspaper predicted, this has happened yet again, with the government announcing a Rs100 billion cut to the development budget rather than trimming any of the government’s other expenses.



In short, we have cut back on investing in the future to finance consumption in the present, on borrowed money no less. There is absolutely no other way to describe it: this fiscal policy is sheer lunacy. We are a developing nation with a young population. Per capita income in the country is less than $1,400 and the median age is less than 20. If the government were to prioritise resources based on what this country needs, it would be spending almost obsessively on future growth through more investments in infrastructure, education and healthcare. But instead, we get spending on defence and energy subsidies that mostly benefit the affluent.

For a party that claims to be responsive to the needs of the Pakistani youth, the ruling PML-N appears to be pursuing a policy agenda that largely benefits the middle-aged and the upper-middle class. If the party were truly sincere in its pursuit of a pro-youth, future-oriented policy agenda, it would sell the nation on the need to trade off higher energy costs today for more stable, faster rising incomes tomorrow. Instead, we get yet more pandering to the already privileged.

This is not to suggest, of course, that all development spending is created equal. There are, no doubt, many projects that are likely to be wasteful and not worth pursuing. But the approach that says ‘cut development first’ is just misguided.

Published in The Express Tribune, February 14^th,  2014.

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