The much hyped budget of 2021 that was awaiting public scrutiny since many days was presented by the finance minister, Shaukat Tarin in the parliament today.
The budget speech was a fusion of strong promises apart from the significant progress that was reported in the preceding fiscal year. Therefore, one has to comb out facts and data to infer an opinion about it.
To begin with, the total outlay of the federal budget is Rs. 8,487 bn. Gross federal receipts are estimated at Rs. 7,909 bn and net at Rs. 4,497 bn. The financing gap is Rs. 3,990 bn, net Rs. 3,420 bn, after accounting for a provincial surplus of Rs. 570 bn.
Three things will determine if government can stay within its fiscal deficit target of 6.4 % of GDP. They are whether or not government realizes its revenue target, whether it stays within expenditure estimates, and if provinces provide the large surplus.
Additionally, the FBR revenue must grow by an additional 25% of the actual collection to reach the target of Rs. 5,829 bn.
The 35% increase in petroleum levy offers a cushion, though at the cost of citizen welfare. Regarding expenditure, the budget provides adequate estimates of 18.5% increase in current expenditure and about 40% in PSDP.
Yet the demands being placed on government are very high. They include much needed spending on vaccination, Ehsaas payments, meeting the circular debt hole for continuous energy supply, subsidy for others other SOEs, salary increases, subsidized loan for agriculture and the weaker population, and higher PSDP.
The quality of growth is a source of concern as well which, ideally, must be through exports and investment. If SEZs actually bear fruit, they will add to production and exports but in subsequent years and require time to flourish. Moreover, the economy has not made the required investment in infrastructure and human capital to put export on a sound footing.
Too much hope is placed on increase in IT exports without the necessary investment in training to produce the high number of qualified experts and technicians needed to boost the IT sector. Nor do we see investment in hardware and connectivity to increase IT access.
The large increase in PSDP is welcome but with relevant concerns. There are likely to be budget cuts. Second, the quality of PSDP portfolio should be such that it boosts growth. PSDP portfolio must provide the soft and hard infrastructure that firms need to enhance investment and productivity or else growth will come from one time spending.
Budget making is a professional exercise that calls for a realistic estimate of income and expenditure. As a document that is valid for just one year, its importance enhances if it is part of a long-term strategy. Without this, the many claims in the budget lack force. For the public, reality lies in the marketplace.