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EDITORIAL: The cabinet approved the medium-term budget strategy paper which projected a growth rate of 4.2 percent for next year. The range of the disparity in GDP projections by different entities at different times within one year is significant: the recent growth projection for the current year is 2.9 percent against the budgeted 2.1 percent (bearing in mind that the Covid-19-related accommodative monetary and fiscal policies were announced and implemented two months before the end of 2020-21), backed by the 3 percent projected by the State Bank of Pakistan, with 1.5 percent forecast by the International Monetary Fund (IMF) and 0.5 percent by the World Bank.

To further confound matters the government also engages in fine-tuning data well after the end of a fiscal year – the budgeted figure indicative of targets set by the IMF while waivers are sought in the next quarterly review from the Fund which then sets harsher upfront prior conditions for the release of the next disbursement. For example, the fiscal deficit was set at 7.1 percent of GDP for 2019-20, revised upward to 9.1 percent noted in the budget 2020-21 documents largely due to the inability of the government to generate the unrealistic revenue target of 5.5 trillion rupees with expenditure rising unchecked. However, by August 2020, the government had revised the fiscal deficit for the year ending 30 June to 8.1 percent. The question arises as to whether this was achieved through innovative accounting (including deferring disbursements) to appease international creditors. Thus the fiscal deficit projection of 6 percent for next year envisages a host of expenditure and revenue measures that on the face of policies in the previous two years appears to be the coin of wishful thinking with one side referring to expenditure allocations and the other revenue generation capacity. And sadly, whichever side of the coin comes up, the fact remains that administration after administration, and the incumbent is no exception, has been unable to deal with what is required to achieve targets – a failure that is linked to our governments’ inability to withstand pressures and threats of strike action.

The PTI administration is onto its sixth Chairman of the Federal Board of Revenue (FBR) and it is high time it acknowledges that changing the Chairman is unlikely to net additional revenue through implementation of a more equitable, fair and non-anomalous tax structure with minimal implications on output and the pocketbook of the lower middle income earners. Reliance on the low hanging fruit, or on indirect taxes whose incidence is greater on the poor relative to the rich, continues. The decision for provision of the identity card of buyers who purchase above a certain minimum amount was abandoned due to influence peddling and threat of strike action. Unless the government succeeds in widening the tax net and includes wholesalers and retailers into the tax net, a process that may require a head-on collision with the vested interests, the situation is unlikely to improve.

A similar situation is evident with respect to expenditure allocations. Violent protests by pressure groups - be they federal or provincial government employees, generalists or specialists (bureaucrats, doctors, nurses, teachers, etc.) are the norm in this country and administration after administration only gives in to demands of those with a high nuisance value. Disturbingly, it is not only public sector employees who go on the rampage destroying public property and beating up on police but also those operating in the private sector, for example, lawyers and some religious groups.

While the Prime Minister (PM) is correct in stating that there is need to change this mindset, yet he has also stated whenever violent protests erupt, his government will not tolerate anti-social elements bent upon destroying public and private property as well as putting the lives of personnel of law enforcement agencies as well as their own on the line. Sadly, the PM, like his predecessors, has done little to change the mindset. While it is certainly a challenge Imran Khan should be reminded that Margaret Thatcher of the UK took on the powerful trade unions with what was being termed at the time ‘a disproportionate force’ and succeeded in changing the mindset with obvious benefits to the public that continue to this day.

With less than half of his term remaining one would urge Prime Minister Khan to prioritize which group he needs to take heads on first and call in the armed forces in aid of civil power if required. If he succeeds he will long be remembered by the people of this country as the harbinger of change.

Copyright Business Recorder, 2021


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