Daily Times

The federal government led by Pakistan Tehreek-e-Insaf (PTI) presented the fiscal budget for 2020-21 in the National Assembly. Since the entire world is facing an uncertain period due to the Covid-19 pandemic, nothing extraordinary was expected from the budget. However, it was expected by many that the government would allocate a greater share of the budget toward education and health care, as the pandemic in Pakistan is almost getting out of control. In a country that is the victim of ignorance and bad health-care, it is impossible to justify huge spending on non-productive expenditures. We must not forget that the current government is not alone in announcing mediocre budgets. It is hard to remember a budget that stirred much excitement in Pakistan’s IMF era. But it is harder to remember a budget that seemed so out of touch with the desperate state of the country’s economy.

The government has announced a Rs70 billion Covid-19 relief programme, but the programme is part of the federal Public Sector Development Programme that stands at Rs650 billion. This effectively means that there is no economic stimulus programme – and that there is around a 20 percent decrease in the amount of economic activity the state generates in the next year through new or continuing public sector development projects. It is not that the money has been moved into economic incentives for industries, businesses, farmers or labourers; it has just disappeared while doing nothing to steady the tide of the growing fiscal deficit. Ironically, the simplest principle of increasing tax collection, to create a healthy economy, is the one that the current government continues to fail to understand in every attempt at balancing the books.

The announcement of ‘no new taxes’, but no new taxes does not mean no changes in existing taxes, which is what the budget speech went on to announce. Some taxes, such as on education, tobacco and sugary beverages, have been increased, while other duties, such as those on certain medical treatments and domestically produced mobile phones stand reduced. These seem more to be a part of an ordinary balancing act, rather than an emergency budget. Budget planners have, in an apparent effort to show a soft budget, failed to tax even luxury vehicles or other items of a similar nature, meaning the FBR is unlikely to be able to meet its collection target of 4.95 trillion.

Perhaps the most disappointing aspect of the budget is the allocation for education and health. We have seen how the near neglect of these sectors over the past seven decades has left us with a nation that lacks basic understanding of education and health issues resulting from a poor education and health system, and even worse access to health or education facilities. The fight against Covid-19 should have taught us a lesson or two in terms of education and health. Despite our failing on both fronts, the new budget has allocated a meagre Rs83 billion for education and just Rs25 billion for health at the federal level despite there having been a generous increase in some other areas of spending. So given such a serious situation, the 2020-21 budget, which has a total outlay of 7,294.9 billion rupees (about US$44 billion), was expected to focus on the health-care system and the education sector. However, as feared, it only allocated 83 billion rupees for education and 25 billion rupees for the health sector.

The government made no significant increase in the development and recurring grants of the School education (SE) or Higher Education Commission (HEC) for the fiscal year 2020-2021, freezing the funds allocation above Rs93 billion, and unfortunately, no relief and nothing for private schools education system. The budget documents said that around Rs64 billion have been proposed as recurring grants while Rs29.47 billion on the development side for the fiscal year 2020-21. In the fiscal year 2019-20, the government had allocated Rs29.196 billion in the Public Sector Development Program (PSDP).

It has not been encouraging to see the government’s self-declared ‘corona budget’ fall so far short of what was needed to stem the economic distress in the economy that has engulfed industries, small businesses, farmers and labourers. Large-scale manufacturing and agriculture have both remained stagnant for a number of years due to the reduction in export demand for export industries. Mass unemployment has been reported across all sectors as Covid-19 has taken a toll on an already stressed economy. The growth rate of GDP is another cause of concern. Essentially, Pakistan faces a major problem. It simply does not have enough revenue to meet its needs, with huge chunks going towards debt servicing, defence and administration. The reality is that we need substantial and holistic changes – which seem very far away at the moment.

The government made no significant increase in the development and recurring grants of the School education (SE) or Higher Education Commission (HEC) for the fiscal year 2020-2021, freezing the funds allocation above Rs93 billion, and unfortunately, no relief and nothing for private schools’ education system

According to the budgetary documents the total size of the budget or the total expenditure budget for the next year stood at Rs7,136 billion, slightly higher than the budgeted figure for the previous year. While of this total, current expenditure for the next fiscal year was budgeted at Rs 6,345 billion, up from the Rs6,193b budgeted last year. The deficit in the new fiscal budget is also the highest in the country’s history, at 3.437 trillion rupees, 7% of gross domestic product.

The PTI government while presenting the budget also announced that tax revenue would be increased to 4.963 trillion rupees, which is around a 27% increase from the target set in the last budget, yet the government has not devised any plan for accomplishing this when it has declared that no new taxes will be imposed. This is likely to create uncertainty among investors and businesspeople, as the new revenue target suggests that after negotiating with IMF, the government will announce a mini-budget in October or November and in which new taxes could be announced.

In addition, in spite of rising inflation and growing unemployment, the government has frozen the salaries and pensions of the people associated with different government offices, and the reason cited is the pandemic and lack of funds, while education and health related sectors are left at the mercy of fate to cope with the rising numbers of Covid-19 victims without any substantial increase in resources. The provinces’ share of the budget has also been reduced. It is estimated at 2,873.7 billion rupees, which is 11.7% less than under the previous budget. This means that despite the rhetoric of the main opposition parties, the Pakistan Muslim League-Nawaz (PML-N) and Pakistan Peoples Party (PPP), they actually played the role of facilitator by not challenging the budget.

On the other hand, this also speaks to the failure of the state to handle the pandemic, as despite the growing numbers of patients, the priority is not to support the masses by deliberately ignoring the education and health sectors. After all, an illiterate society deprived of knowledge is easy to enslave. Despite the government target of attaining 2.1% growth in GDP in fiscal year 2020-21, it will be almost impossible to achieve even 1.50% growth, as instead of being brought under control, the pandemic is spreading.

The total amount for External Receipts in the federal budget for FY21 are estimated at Rs 2.22 trillion, shows a decline of 2% over the revised estimates for budget 2019-20. The total External Receipts is the sum of External loans and External grants, the government has planned to obtain external loans worth Rs 2.16 trillion in the upcoming fiscal year (FY21) as compared to Rs 2.18 trillion received during the departing fiscal year FY20.

Besides, government will receive Rs 20.66 billion worth of Foreign Grants in FY21 to aid projects of Federal departments, Autonomous bodies and Provinces. This shows a decline of 36% as in the outgoing fiscal year, government received Rs 32.49 billion as External Grants. The government has also planned to obtain Rs 44.750 billion for project loans outside the PSDP, including Rs 2.34 in grants. If project loans outside the PSDP are included, the total external resources are valued to be Rs2.22 trillion in FY21. Meanwhile, it is pertinent to mention that the major portion of these external receipts (Rs 1.23 trillion) will be spent to repay foreign loans, while Rs 183.69 billion would be consumed to repay short-term credits.

Last year, the poor economic performance was blamed on the previous PML-N government, and the new government asked the people to tighten their belts, and the people did it because they had no other option. The economic hardship the country has been facing for the past two years called for a radical change in the approach to budget-making. After two years of underwhelming steering of the economy, the Covid-19 crisis had presented the PTI government with an opportunity to show some vision and take over the reins of an economy that has gone from bad to the verge of collapse under its stewardship. Instead, the government has delivered another budget that showed little imagination, with little to cushion the population after IMF-enforced economic contractions. In short, the government should re-evaluate its budget policy to deal with this pandemic, especially for education and health sectors. It is a question of the life of the millions. Any policy based on the false or wrong assumptions will lead us to a disastrous situation.

The writer is President of All Pakistan Private Schools Federation. President@pakistanprivateschools.com