Without changing revenue and expenditure targets, the PTI government expects its revenue shortfall of almost Rs170 billion in the first half of this fiscal year to be recouped over the next five months. Hence, it hasn’t announced any change in the fiscal deficit limit of 5.1 per cent of GDP for 2018-19.

The government has three bets to bank on: lower or stable international oil prices, favourable response from the judiciary on the tax on mobile phone services and an out-of-court settlement of the dispute with various industries over more than Rs400bn relating to the Gas Infrastructure Development Cess (GIDC).

While announcing the first supplementary budget as a “bypass surgery” in September 2018 involving a steep GDP adjustment of 2.1pc, Finance Minister Asad Umar had promised the reforms would follow in about a month to put the economy on the road to recovery. It took him more than a quarter of the year to roll out “a package of investment and export promotion for industrial revival and job creation”.

The government criticises the last government for ruining PIA, Pakistan Steel and the power sector. Yet the reform package hardly touches upon their revival

Most of the incentives for small and medium enterprises (SMEs), housing, agriculture, fresh industrial investment and the stock market will come into force with the start of the next fiscal year ie July 1. Hence, the mini-budget appears to be an attempt to inject a feel-good sense in a market depressed by “drawing-room discussions about economic uncertainties”.

Yet the more pressing dilemma facing the country was the dilapidated condition of state-owned entities. The last government failed to deliver amid an adverse political environment. The government leaves no opportunity to criticise the past government on account of PIA, Pakistan Steel and the power sector. Yet the reform package hardly touched upon their revival.

In fact, its plan for the creation of a wealth fund — Sarmaya Pakistan Fund — to take care of the loss-making entities is yet to come into play after almost six months of the PTI government. The SME revival project should have taken priority over the “investment and promotion package” because of continuously accumulating losses.

The power sector’s total circular debt has gone up from Rs1.1 trillion to Rs1.4tr while PIA and Pakistan Steel keep accumulating their losses without any accountability. On top of that, the expert opinion that the government is drawing from the private sector may be raising the question of a conflict of interest. People with direct stakes in different sectors of the economy are advising the government, which should be avoided.

The economic team plans to engage with the changed leadership of the Supreme Court of Pakistan for a way out of the phone tax imbroglio, which has reportedly cost Rs30bn to the kitty. It has already started increasing general sales tax on oil products as the international market went down after losing over Rs70bn in populist mode. Last month, it generated over Rs4bn in additional revenue on this count and expects it to double during the current month as it keeps increasing tax rates.

More importantly, the biggest hope is the GIDC where the government expects a recovery of no less than Rs200bn even though it has not stated a target pending parliamentary approval. This remains a big question mark in view of the adverse atmosphere that the government has created in parliament. This is tricky because the GIDC recovery is not being routed through the supplementary finance bill that has to be passed by the National Assembly. In fact, the amendment to the GIDC law requires approval from both houses of parliament.

The industries have been making provisions for the ultimate payment in the case of an adverse outcome, even though they have secured stay orders from court and been able to hang on to them for almost six years now. The offer approved by the federal cabinet for the amendment to the GIDC law is to provide a 50pc discount on future rates to industries that are ready to pay half of the past arrears. This can be beneficial to both the government and gas consumers.

Meanwhile, additional expenditure will accrue on account of the higher debt servicing cost. Banks have been reluctant to invest more in government papers for almost a year amid a low policy rate environment. They have recently started responding to the double-digit interest rate. The likely policy rate appreciation may be helpful in raising more funds to roll over maturities from banks. Some of the banks may have been earning more from their foreign exchange business than interest on loans, which is their core business.

The government’s borrowing from the central bank has already quadrupled to almost Rs4tr so far in this fiscal year against Rs1.1tr a year ago, which carries a direct cost for the people.

The entire government machinery met a shortfall of about Rs170bn in revenue collection in six months and remained on whirlwind tours to secure financial support from global friends. But Rs160bn or so appeared to have already been lost in 25 days as the custodians of foreign exchange reserves spent $1.147bn trying to maintain the exchange rate after last month’s controversies. Official reserves that stood at $8.05bn after initial Saudi injections on Dec 14, 2018 were down to $6.9bn by Jan 10.

Published in Dawn, The Business and Finance Weekly, January 28th, 2019