Governments give you this rare opportunity of allowing a sneak peek into their intentions, and priorities, on that one day for which lobbying, preparations, and calculations take place for a better part of the year.
The budget speech mostly comprises of big numbers as the government official, typically the country’s finance minister, runs through the document in an unusual show of haste, pausing only where achievements and risks are to be highlighted. Inefficiencies and missed targets are explained with a typical blame on ‘inheriting a broken system, economy’, and caution is thrown to the wind as next-year’s projected estimates are announced.
This year’s announcement was no different. But when you look at the finer details, you begin to question if it was even supposed to be different. It should have been.
A country battling for life, quite literally, amid a choked up economy, with the virus strangling whatever energy there was left in it, saw a budget announcement that may very well have been announced in February, and it wouldn’t have made a difference.
An upwards revision in the healthcare budget, an area where provinces will kick in with their contributions as well, was finally an admission that the system needs help. But it was one of the very few changes the government made amid the Covid-19 crisis.
Covid-19 expenditure part of PSDP
Minor tinkering with the federal government’s Public Sector Development Programme (PSDP) resulted in an allocation of Rs70 billion under the ‘Covid Responsive and Other Natural Calamities Programme’ with a similar amount going to ‘Development Expenditure Outside the PSDP’, compensating for those heads that faced the axe inside the PSDP.
Making the Covid-response fund part of the PSDP raises eyebrows, begging the question as to how coping with the virus is part of a development programme.
Subsidies go down, but why?
How does one justify a decrease in subsidies when you start off the headline with “in order to alleviate the impact of inflation on citizens, especially the poor segments of society, the Federal Government spends a fairly large sum on providing power and food subsidies”.
The paragraph then ends with “subsidies have been decreased by 23pc over the original allocation”. Does this not sound contradictory?
Such tweaks reveal the manner in which the government scrambled to adjust the budget, amid multiple challenges.
While one hates the idea of picking on tiny details, especially at a time of crisis, it is during this time that scrutiny should be higher. In such a crisis, when resource allocation has to be prudent, asking questions can help the arrival of a better solution.
Ambitious tax target
When it comes to the revenue side of things, the government’s scrambled response becomes even more obvious.
Estimates of direct taxes, mostly derived from income, have been put forth as Rs2.043 trillion, a meagre 2pc decline over the previous year’s projection. However, last year’s revised collection has amounted to Rs1.6 trillion, a staggering 20pc deviation from the original projection. A three-month slowdown in activity, as well as a contracting economy, and one could say that people’s income suffered. Hence, the low collection.
So how is it that the coming year will be better, especially when rates of taxation are, according to the government’s announcement, the same? Sounds overly ambitious and optimistic.
Similarly, when it comes to sales tax collection, estimates have been hit by almost a third. This too makes perfect sense since almost a third of the year was spent during a pandemic and the remaining in a state of conservatism, inflation, and controlled expenditure. So kindly explain how the coming year’s sales tax collection is tipped to be almost 34pc higher. Are people going to be consuming more, thereby contributing more in sales tax?
It seems as if the FBR has completely discounted Pakistan enduring another lockdown, and continuing business as usual. This is what the budget was: business as usual.
Sharp rise in domestic debt
To finance the budget deficit and meet rising expenditures, the government will add Rs1.18 trillion to public debt during 2020-21 in the shape of Pakistan Investment Bonds (PIBs) and Ijara Sukuk Bonds. This amount is a whopping 118pc higher than the previous year.
It is appalling to note that despite the government more than doubling its domestic debt with an increase of over Rs600 billion, its allocation for the most pressing issue at hand, Covid-related relief, was just Rs70 billion and that too was adjusted in the PSDP after axing other heads.
The government has shown its hand, and the public isn’t impressed.