EDITORIAL: The Shaukat Tarin-led Finance Ministry has projected a growth rate of 5 percent for next fiscal year against 3.9 percent in the current fiscal year premised on raising tax revenue to 10.8 percent of GDP (a one percent rise from the current year) and total expenditure of 15.8 percent of GDP (0.4 percent higher than the revised estimates of the outgoing year), thereby projecting a fiscal deficit of negative 6.3 percent against the projected negative 7.1 percent this year. While budgets have long been regarded as a wish list yet it is relevant to note that the achievement of supporting revenue and expenditure targets in next year’s budget has been challenged by the International Monetary Fund (IMF) resulting in the sixth mandatory review talks with government authorities being declared “inconclusive.” This, in turn, implies that the 750 million SDR tranche release would be deferred till the next quarterly review scheduled for 3 September 2021, subject, of course, to reaching an agreement at the time. And pledged budget/programme support by other multilaterals/bilaterals reliant on strict monitoring by the Fund to provide them with the comfort level to disburse funds is also likely to remain compromised.
Sadly, growth claims by the government for next year are not supported by the World Bank which has projected a growth rate of 2 percent (less than half what is budgeted) with “Pakistan Poverty Outlook” report projecting growth to gradually strengthen but remain muted in the medium-term, fiscal deficit and debt to remain elevated with output growth expected to recover gradually averaging 2.2 percent 2021-23 due to contributions from private consumption.
The Asian Development Bank’s website projects the growth rate for the current year at 2 percent (unclear whether the website has not been updated or whether the Bank is projecting about half of the government’s growth rate) and 4 percent next year – one percent less than what is budgeted.
The leader of the Opposition, Shehbaz Sharif, in his post-budget speech delivered after three day pandemonium in the assembly unfairly compared the growth rate during the PML-N tenure with that of the present government. First, the refusal of the PML-N leadership to publicly acknowledge the patently flawed policies of the then finance minister Ishaq Dar, particularly keeping the rupee overvalued and keeping interest rates artificially low which in turn played havoc with the components of the current account deficit including exports, imports and a heavy reliance on external borrowing, provides the incumbent government with an irrefutable rejoinder: blaming the previous administration. A better option would be for the PML-N to cite the less than a year’s tenure of Miftah Ismail who began to bring the rupee value to its market value, though it was an election year.
Secondly, Dar’s data manipulation was legendary and he was reportedly responsible for downgrading growth two years before the PML-N tenure in 2010 so that he could claim the highest growth rate in five years. While Dr Hafeez Sheikh also had a penchant for data manipulation yet his superior academic credentials allowed him to do so with panache; for example, lowering the rate of inflation at one stroke by decreasing the food component in Consumer Price Index calculation by six points. And finally, there was no pandemic 2013-18 and its negative impact on the Pakistan economy in 2019-20 and 2020-21 cannot and should not be understated.
If the Opposition focuses on the July 2019 agreement with the IMF, an agreement which is uploaded on its website, it can more credibly argue that it was an anti-growth agreement as it envisaged a GDP rate of 1.5 percent and lacked empathy with the people of Pakistan as it projected a rate of inflation at 13 percent – double than during the previous year. Shehbaz Sharif did dwell on the rise in poverty levels maintaining that 20 million people have fallen below the poverty line – a claim that is supported by Borgen Project, a ‘non-profit’ US organisation, citing the rise in poverty by 18 million people from end 2018 to end 2020.
That there is an obvious disconnect between the opposition and the government is an understatement and one hopes that the recent agreement on rules of behaviour in the assembly would lay the groundwork for a more informed debate. However, at the same time one would hope that the Fund staff acknowledges that the political opposition is a stakeholder too like industrialists, farmers and non-government organizations and it must take them on board for the success of politically challenging reforms.
Copyright Business Recorder, 2021
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