The budget deficit has risen to Rs826 million in the first half of the fiscal year. This is a cause for concern on its own, but the US’ suspension of defence assistance and the devaluation the Pakistani rupee should add to the government’s worries. Things are likely to be made worse if the election year sees exorbitant spending on politically motivated projects. The Ministry of Finance has revealed that foreign debt servicing was the major factor in the increase in budget deficit. Foreign and domestic debt servicing amounted to Rs625 billion in July-November period in 2017. Meaning that Pakistan is more likely now to return to the IMF for another bailout. The Pakistani rupee has undergone a devaluation of 7.2 percent since last July, increasing the cost of foreign debt servicing even more. Any bailouts we take now will make our pockets even lighter in the long run. In the short-term, fiscal discipline is needed to manage our finances. The federal government must not waste public funds on election-related development schemes. Spending extra money near election season has been a hallmark of most of our governments in the past. The PML-N government should show some maturity and set a new trend by putting the country’s long term financial interests over and above its short term political gains. We cannot keep relying on indirect taxes alone, while expecting to reduce the budget deficit as well. Ultimately, we have to evolve a long-term strategy to expand the tax net and to shift from reliance on indirect taxes like the Generalised Sales Tax (GST) to direct taxes on income earned from productive activities. Considering that the central government’s debt and liabilities have increased to Rs21. 4 trillion — 68 percent of the national output — it is high time that the government chalks out such a plan this year. And sectors, hitherto, exempted from income tax, like agriculture, will have to be added to the tax bracket. The sooner it happens, the better it will be for the economy. * Published in Daily Times, January 7th 2018.