THE second budget delivered by the PML-N government on June 3 was initially received well by industrial barons, bankers and brokers. Ordinary citizens, however, were not too inspired by the concessions and incentives for investors and exporters in the absence of an inclusive growth strategy.

Finance Minister Ishaq Dar was on point when he projected the budget as an expression of his party’s economic vision. The fancy grand projects, the tilt of the budget proposals towards the urban elite, visible efforts to satisfy the IMF’s concerns on deficit and subsidies, and coming clean on social responsibility by jacking up expenditure on the Benazir Income Support Programme (BISP) — all carry the PML-N’s signature.

If there was any confusion, Dar sealed it by proposing to change the name of the targeted subsidy scheme for the poor by replacing the name of slain PPP leader with the word ‘national’.

There is no better way to address unemployment and poverty than to initiate infrastructure projects and encourage the private sector to expand — Finance Minister Ishaq Dar

A member of the government team in Islamabad termed the budget ‘balanced and pragmatic’. “It is not a populist exercise. The government tried to accommodate the demands of the business community. But it also demonstrated its sensitivity for the underprivileged by increasing the minimum wage to Rs11,000 and strengthening the system of direct subsidies by increasing allocation for BISP and the PM Youth Programme to Rs118 billion, from Rs75 billion last year,” he commented over phone.

As for heeding the IMF’s advice, he defended, “There is no point in understating the value of the donor’s contribution. Let’s not forget that IMF lending saved Pakistan from a possible default in September 2013”.

On the question of liberal concessions to the business community, he got angry. “Investment is absolutely essential not only for the investor but for everyone who works on his project. There is no better way to address unemployment and poverty than to initiate infrastructure projects and encourage the private sector to expand,” he argued.

Will the budget deliver growth? Experts believe it might, but they express serious doubts over its quality and sustainability. They found the budget lacking in addressing structural weaknesses imbedded in social and regional disparities, which require tangible measures to improve the quality of governance by making the framework simple and effective.

They admitted that the business and donor community trusts this government better than the last one, and that it did help the economy, which posted a better performance during the last fiscal as compared to the year before. The economy grew by 4.1pc, according to the Pakistan Economic Survey, as compared to 3.6pc last year.

Some others believe the Rs3.96 trillion FY15 budget, despite all the talk about investment to realize 7.1pc growth target by 2017, is focused on stabilisation. The government hopes to mobilise Rs2.81 trillion over the year ahead. It, however, chose to rely on indirect taxation, which will contribute close to 70pc of the total tax revenue.

“It seems the government has accepted the inefficiency of the tax machinery. It is disturbing that instead of taking measures to improve it, the government used this as an excuse for not bringing the retail sector into the tax net directly,” an irate business leader said. He was critical of the scheme to charge retailers extra on electricity consumption for different brackets.

The government has pledged to bring down the fiscal deficit by eight percentage points to 5pc by containing the rise in public expenditure to 6pc. In real terms, even if we assume inflation at 9pc for the year ahead, it means a fall of 3pc in public spending. How well can the government fulfill its obligation of delivering better governance is anybody’s guess.

Experts warned of a possible popular backlash to the economic policies of the current government, which they believe are overtly loaded to favour the urban elite and Punjab (home constituency of the ruling party).

“The PML-N team is trying to fix the economy by using a tried and failed economic model. Under Pakistan’s peculiar conditions, where democracy is in a nascent stage, the failure of the government to deliver on improving the economic wellbeing of the people can alienate masses who may choose to withdraw their support,” warned a supporter of the Sharif brothers who is active at the Lahore Chamber of Commerce and Industry.

“The blind faith on the market landed the world in a crisis. Today, the debate is on how to improve the quality and affectivity of regulatory oversight. No one any more contests the need of an efficient government equipped to discipline the market for optimal social returns by utilising the country’s resources and avoiding economic and political crises through guided free play of the market,” an economist who has been in and out of the government commented.

“Unfortunately, these developments have not registered with the PML-N and its economic team. Their confidence in the old model is misplaced. Growing popular discontent over economic hardships can’t be wished away. It is absolutely necessary to do what it takes to improve the rate of capital formation through investment in agriculture and industry, and no sane person can undermine the role of the private sector in the activity.”

Published in Dawn, June 9th, 2014