YESTERDAY’S budget speech provided the perfect metaphor for the state of Pakistan’s economic management: a lone man in the middle of a room straining to be heard above the thunderous roar of politics all around him.

This state of affairs has been the norm for far too long now, and it is the principal reason why reforms have never been able to be advanced with any seriousness.

Two things stand out in this budget. One is the severe weakness of the government, the other is the shift in allocations away from development towards current expenditures. Both are linked.

What we are seeing is a government hobbled by severe challenges to its rule, having to bend over backwards to accommodate as many special interests as it possibly can.

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The key feature of the budget is the opacity of its revenue plan. It almost appears as if the government is not too worried about the resources, and that more attention has been paid to doling out the allocations and the incentives.

Out of the 18pc increase in tax revenue, totalling almost Rs750bn, the largest increases appear to be coming from indirect revenue measures such as the petroleum levy and taxes on communications.

FBR taxes are going up by Rs500bn, with the increases divided almost equally between income taxes, sales tax and customs duties.

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Considering that much relief has been given on all these heads, it appears the assumption behind these increases is a combination of broadening the tax base due to the amnesty scheme as well as natural growth owing to inflation and the depreciation of the rupee (which should lift sales tax at the import stage and customs duties). In short, the revenue plan is floating on hope, while expenditures have been given detailed treatment.

This is to be expected. The government that is drawing up this budget may or may not be the one to actually have to abide by it.

As it stands, this budget is likely to require many midcourse changes.

Many of the proposals are laudable — for example, the reduction in customs duties on imports of raw materials and other such measures.

But the Achilles heel of the budget will be its revenue requirements to meet the elevated current expenditures.

The redirection of resources away from development spending towards current expenditures provides one source of funding, as well as the stupendous hike in bank borrowing — up by Rs625bn — and a higher estimate for provincial surpluses.

If the assumptions underlying it materialise, it will successfully boost consumption, with possible knock-on effects on growth (and imports).

But if, as is more likely, the assumptions prove too optimistic, the next government will be forced to modify it in significant ways, possibly rolling back many of the incentives given to middle-class households and industry.

Published in Dawn, April 28th, 2018