Budget preparation exercise: Process marred by political instability

ISLAMABAD: The budget-making process for next fiscal year is limited to fixed expenditure as International Monetary Fund (IMF) endorsement is critical for generating external financing while the prevailing political uncertainty in the country has slowed down economic activities.

An official on condition of anonymity said that the Pakistan authorities are waiting to reach a consensus with the Fund on the seventh review before preparing the budget which would be in accordance with the targets and performance actions agreed or else the country would face immense difficulties in generating external financing.

He said that although he was not directly involved in the budget-making process; however, in his opinion, the budget exercise so far has only been limited to fixed expenditure.

The official added that the month-long political uncertainty has badly hit the economic activities in the country as many decisions have been withheld by the business community, simply because no one knows whose government would be subsequent to the no-confidence motion against the prime minister.

Budget exercise has begun

Background discussions with officials also revealed that there would be immense pressure on the government - whether present administration survives or the opposition takes over - to undertake populous measures to ensure smooth passage of the budget from parliament due to a thin majority.

Finance Ministry; however, remains tight-lipped about the current status of the seventh review under the Extended Fund Facility (EFF) dating back to March 22 when the finance minister announced that he was expecting a response to the explanation provided to the Fund on the financing the Prime Minister’s relief package.

The Fund had expressed serious concerns over financing of Prime Minister’s Relief Package – 10 rupees per litre reduction on petroleum and products and 5 rupees per unit reduction in electricity tariffs to be applicable till 30 June 2022 - as well as the industrial package announced on 1st March, envisaging tax amnesty scheme for the industrial sector.

The Finance Ministry official acknowledged that the Fund was not yet satisfied with the government’s justifications and more talks are expected in days to come.

Copyright Business Recorder, 2022