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Coronavirus
LOW Source: covid.gov.pk
Pakistan Deaths
28,753
824hr
Pakistan Cases
1,286,022
39124hr
0.89% positivity
Sindh
476,233
Punjab
443,310
Balochistan
33,491
Islamabad
107,811
KPK
180,194

EDITORIAL: The spokespersons for the government/Pakistan Tehreek-e-Insaf (PTI) while briefing the media on decisions taken during the meeting of the core committee of the PTI on Wednesday, stated that petrol will be provided to owners of motorbikes and rickshaws at subsidised rates within the week though the mechanism through which this would be implemented has yet to be worked out. This decision, taken during a PTI core committee meeting instead of in the cabinet, reflects two disturbing elements. First, the decision was political no doubt triggered by the massive rise in petrol and products prices announced last week that generated widespread criticism. One would, however, hope that given the current state of the economy the government takes decisions based on economic rather than political considerations and with due input from the finance ministry.

And second and more disturbing, non-party members of the cabinet, who number more than half of the entire cabinet, and who are in a position to identify the possible lacunae in implementing such a plan - notably Dr Sania Nishtar, Special Assistant on Poverty Alleviation and Social Safety to the Prime Minister, and Shaukat Tarin, Advisor to the Prime Minister on Finance - were noticeably absent from this meeting.

Prime Minister Imran Khan and his team of spin doctors have, rhetorically at least, responded to criticism over rising inflation with the argument that targeted subsidies would rise, the Ehsaas programme would enable the poor and vulnerable to sustain their quality of life and the Kamyaab Pakistan Programme would deliver cheap credit as well as cheap inputs to those operating in the small and medium scale units. The prime minister undoubtedly has his heart in the right place and is keen to dampen the blow of inflation on the weaker segments of society but the precarious finances of the federation are a big stumbling block. Therefore, the government team would be well advised to look at the resource constraints facing even the rich countries in ensuring that the poor and vulnerable are all provided adequate support funded by their taxpayers.

In our case, the taxpayers are too few and all attempts so far to bring those operating outside the tax net have borne little fruit in spite of Nadra having data of procurement of expensive houses, cars, foreign travel, for more than a decade. In addition, the PTI administration has raised total budget outlay from 5.1 trillion rupees in 2017-18 (the last 11 months of the PML-N administration) to over 8.4 trillion rupees budgeted in the current year - a rise of 65 percent in its fourth year. Federal Board of Revenue (FBR) collections rose from 4 trillion rupees in 2017-18 to 5.8 trillion rupees budgeted in the current year, a rise of 45 percent, while expenditure rose from 4.7 trillion rupees in 2017-18 to the budgeted 8.4 trillion rupees for 2021-22 or a rise of 79 percent and there lie the seeds of inflation today.

Current expenditure increased from 3.4 trillion rupees in 2017-18 to 7.5 trillion rupees for 2021-22 - a rise of 120.5 percent. And if one takes account of the fact that the Khan administration credits its Ehsaas programme under current as opposed to Development Expenditure outside the Public Sector Development Programme, then it would surprise many that total Ehsaas programme budget for the current year is only 246 billion rupees and this amount has been allocated at a time when poverty levels are estimated at around 40 percent of the population.

It is also significant to note that subsidies in 2017-18 were budgeted at 138 billion rupees, around 20 billion rupees more than the revised estimates of 2016-17 while subsidies in 2021-22 have been budgeted at 682 billion rupees against 430 billion rupees in the revised estimates of last year. Any further rise in subsidies is likely to be opposed by donors or lenders, which has to be factored in, as the budget is relying on over 17 billion dollars in foreign loans in the current year.

Checking inflation is primarily the responsibility of the State Bank of Pakistan which has a very limited role in our case, as the inflationary spiral is 'supply side' driven where monetary policy tools have limited effectiveness. The situation is further confounded by the fiscal imbalance due to a massive rise in government expenditure funded by borrowing rather than revenue and a worrisome depreciation in the PKR value.

Copyright Business Recorder, 2021

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