Budget figures seen as extremely fluid, likely to change, say experts at a seminar organized by IPS
ISLAMABAD, June 18 (SABAH): The figures in the provisional budget, presented on June 10, are extremely fluid and would not remain the same in the final budget that will be approved at the end of the month. At this time, the political instability, which is coinciding with the economic instability, has created a critical situation for efficient budget planning and approval.
This was observed during a hybrid seminar titled “The Federal Budget 2022-23: A Review”, organized by the Institute of Policy Studies (IPS) to evaluate the federal budget for the next fiscal year and its economic direction through the lens of policy.
The session – co-chaired by Professor Dr. Abdul Saboor, dean, Social Sciences, PMAS Arid Agriculture University, Rawalpindi, and Khalid Rahman, Chairman IPS – was addressed by eminent economic policy analysts including Abbas Raza, former chairman, National Tariff Commission, Dr. Pervaiz Tahir, former chief economist Planning Commission of Pakistan, Dr. Waqar Masood Khan, former SAPM on revenue and former secretary finance, Zaheeruddin Dar, founder, Centre for International Entrepreneurship and Trade, Dr. Salman Ahmed Shaikh, Director Islamic Economics Project, and Mirza Hamid Hassan, former federal secretary.
Zafar ul Hasan Almas, joint chief economist, Planning Commission of Pakistan also participated in the discussion.
Dr. Pervaiz Tahir was of the view that the present budget indicates no seriousness and philosophy behind its preparation. He noted that despite setting growth targets, Pakistan is not moving towards growth because of inherent challenges and limitations in its economic structure. Many problems and challenges would continue to exist for some time before actual growth is visible.
He further pointed out certain challenges including the low long-term investment rate and direction of the growth target. Confronting the criticisms made on low growth rate of five per cent, he stated that a growth rate beyond 6% can create a crisis for Pakistan. Talking about the role of the IMF in budget approval or planning, he said that Pakistan would have been in a different position if it had done its planning without the intervention and role of the IMF.
Zaheeruddin Dar pointed out that it is too early to visualize the effect and outcome of this budget as the figures are expected to change and the actual picture will become evident at the end of the fiscal year through closing accounts. He stated that Pakistan is already going through a default state in terms of balance of payments, but has not announced it. This is because by doing so, it is the elite class that would have to pay the price, while in the current scenario it is the poor who are paying the price.
Sharing his insights on tax evasion, he elaborated how the collection is increasing every year, only to result in a declining tax-to-GDP ratio. He said that the capacity to pay taxes is decreasing every year, resulting in a continuous increase in tax rates, a decrease in tax-to-GDP ratio, and decreased economic activity. He also highlighted the ignorance of the politicians and policymakers concerned on this important issue.
Dar said that Pakistan faces several challenges due to the Ukraine conflict and to meet those challenges the country must invest in its economy timely to generate productivity.
Abbas Raza was of the view that the budget presents a very bleak state of the economy faced with trade deficit, on the one hand, and unmanageable foreign and domestic debt, on the other hand. While confronting the silence of the budget on various issues, he highlighted the failure to propose effective policies and measures for debt retirement, domestic revenue mobilization, industrial revival, control of POL prices, and inflation control.
Quoting the observation made by late finance minister Dr. Mahbub-ul-Haq regarding black money, Raza elaborated how corruption and tax evasion lead to further economic challenges including unmanageable fiscal debt, devaluation of the rupee, trade and current account deficits, and compliance with the IMF and World Bank conditions.
Sharing his observations about the consolidation measures adopted by the government, he opined that they are neither effective nor sustainable as they don’t serve the purpose of actual consolidation actions. He called them hasty consolidation measures whose implications include an increase in unemployment, weak industries, artificial hyperinflation, social imbalances, crimes, political instability, and the threat of economic collapse.
Dr. Waqar Masood Khan was of the view that the budget failed to address the people’s grievances and gain public trust. He also expressed his concerns on the trade deficit, revenue generation, tax-to-GDP ratio issues, and expenditure of government. While evaluating the breakdown of budget figures, he pointed out that no option is left for any productive investments to make the economy stronger.
Dr. Salman Ahmed was more concerned about the low proportion of the budget for public sector development programs and social protection sectors. He observed that the budget for every public sector development area like health, science, and education, had been reduced this year.
While presenting a breakdown of budget figures, he apprised the audience of how flawed the distributions are and how difficult it would be to achieve the targets. In addition to highlighting the ignored areas of industrial privatization and investments in the social and public sectors, he also pointed out budgetary flaws regarding tax evasion, reduction of subsidies, inflation, and burden on the poor.
Hamid Hassan expressed his concerns over the much-neglected energy, water, and food security. He maintained that despite the very critical current situation, there seems no apparent direction in the budget for environmental adaptation. Even though Pakistan is a water- and energy-stressed country, the nominal policies presented for these sectors are just an eyewash.
He further stated that the country is going in a reverse direction owing to system inefficiencies and reduction in provisions for energy, water, and food security. Lastly, he stressed the immediate need to conserve resources and address flaws and lapses in decision-making and policy.
Dr. Abdul Saboor, in his closing remarks, highlighted the unvisited aspects of SDGs and other international commitments, to which Pakistan is bound, the agriculture sector, which is marked by extensive, research, and science gaps, and cryptocurrencies, which could be a haven for revenue generation. He concluded that there seems no direction towards accomplishing these important aspects in this budget.
Khalid Rahman, in his conclusion, stated that the prevalent circumstances, which are an outcome of successive years of bad governance, have created space and time constraints of budget planning for the present government. He further stated that focusing on the budget as an exercise and subject of political economy would create better understanding and productive outcomes in the present scenario, which is marked by deep-grown governance issues and resource management inefficiencies.