Daily Times

It has been four days since the budget 2023-24 was announced and I continue to ponder what could have been a defining moment in countries budgetary reformation. Alas! An opportunity lost it is.

I sat with Mr Shabbar Zaidi, seeing any ray of hope the Budget 2023-24 might have brought. But his response was also as I expected, the numbers reflect “Dar Melodrama.” I wish there was something I could appreciate in the number represented in the Economic Survey of Pakistan or the Budget. If I were to share my disappointment on the budget, words will fail me. However, what shocked me to the core is our senior economist’s inability to learn from past mistakes. Does this budget offer any ray of hope? Will more than 3 per cent of taxpayers pay 90 per cent or more in direct taxes? Will the 40 per cent-contributing retail and agriculture sectors contribute more than 2 per cent as a result of the budget? No.

An increase in the Benazir Income Support Program from Rs. 400 billion to Rs 450 billion amidst the absence of transparency is calling for trouble. Our expenditure in the form of subsidies is absurd, to say the least. Why do I object to this? Firstly, programs like this do not teach people to catch fish, in turn, makes them dependent on easy money. We are a classic example of “economic free riders”. Our tax-paying overburdened middle class has been squeezed further to pay hundreds of indirect taxes which could have been easily and systematically spread over a larger taxpayer network. This makes it a case of lack of intent – lack of knowledge & capability I wouldn’t touch upon.

The capital market investors will not receive the increase in super taxes and the reinstatement of incentive taxes well.

Agriculture remains untouchable with subsidies, enhanced credit limits, and no sign of taxes. What did the coalition government do to improve the agriculture standards is yet another mystery. State-owned Enterprises will continue to be a burden on the government in the worse way possible. I mentioned a few basic reforms that reflected the true need of our economy in my last publication yet all we see are false promises, unachievable targets, and a poor distribution of loans.

The capital market investors will not receive the increase in super taxes and the reinstatement of incentive taxes well. The imposition of a tax on currency withdrawals is detrimental to the advancement of financial inclusion. This will increase currency circulation and cash economy growth, as well as increase upward pressure on inflationary readings. The export industry cannot sustain the regional energy price budget, which includes cross-subsidies, general collection and distribution losses. The substantial increase in government employee compensation and pensions should have been accompanied by measures to improve productivity and reduce the enormous cost of governance in Pakistan. However, the absence of governance and productivity will have a snowball effect on the economy of Pakistan with far-reaching consequences. There is no control over fiscal expenditures, and the government has announced a dollar amnesty that the IMF opposes.

The real aftermath of this budget would be the IMF disaster that is brewing for months and is now certain to follow. I am certain that this budget is inadequate for meeting IMF conditions and Pakistan is headed for the same consequence that faces Sri Lanka. Due to the continued incompetency of the government and its inability to control major economic indicators, the IMF has taken a rather unusual route. The IMF is conducting a comprehensive governance diagnostic that will assess Sri Lanka’s corruption and governance vulnerabilities and provide, prioritize, and seek recommendations. Sri Lanka will be the first Asian country to endure an IMF governance diagnostic exercise. However, this time IMF is taking a step further through engagement and collaboration with stakeholders and civil society organisations in its quest for the vital area of reform.

I believe that the IMF has continuously pointed out the lack of transparency and governance in Pakistan as well. Therefore, the time is not far when it will openly demand a comprehensive diagnosis of critical government institutions. This is a high probability, especially because Pakistan has requested ninth and tenth reviews with the IMF at once. One can only laugh or cry at such a request – if it is bravery or stupidity is yet to be seen. Are we ready as a nation to face such a humiliation, perhaps it is too late to even consider a face-saving measure.

I try to present my writings with solutions and focus less on criticism but after four days of pondering upon the budget documents, I may not have a solution to this budget. How I wrap my head around the budget for 2023 -24 is still a mystery.

The writer is Foreign Research Associate, Centre of Excellence, China Pakistan Economic Corridor, Islamabad.