THE PTI wants to buy its way out of trouble. Who will pay the price?
The federal budget 2021-22 presented by Finance Minister Shaukat Tarin on Friday is the documented evidence of this political strategy. He has rung the bell, and the floor is open for business.
It is this business that the PTI wants to stimulate by aiming for growth touching five per cent next year and crossing this threshold on the eve of elections. The progression in the government’s political narrative is already visible. This narrative is telling the voter — yes, the same voter ravaged by inflation and unemployment — that difficult times are almost over and good times, as promised by Prime Minister Imran Khan, are around the corner. This budget is Exhibit A for the new narrative. Government spokespersons will turbo-charge the narrative in the coming days and weeks, and fuel it with data that has nourished the budget document unveiled in parliament on Friday.
The budget tells a story steeped in ambition. The story says the government will now loosen its belt, spend its money, freeze hikes in utility charges, save citizens from further taxation and inject booster shots into programmes like Ehsaas and Naya Pakistan Housing. The growth underway is expected to finance this ambition. Large-scale manufacturing is clocking impressive numbers, agriculture is giving bumper yields, remittances are raining down like never before, tax collection is showing encouraging trends and the twin deficits have been tamed. Well, at least these are the fancy talking points that government spokespersons are carrying in their pockets as they troop out to wage data wars in the cushy confines of TV studios.
Leader of the Opposition in the National Assembly Shehbaz Sharif and PPP leader Bilawal Bhutto-Zaradari spoke to journalists after the finance minister’s speech and trashed the budget and its lofty ambition. However, once the budget sweeteners start to trickle down into the lives of citizens — regardless of the harsh realities of macroeconomics — the opposition will have an uphill task tearing into the government’s economic performance from the political angle. Specialists within the opposition ranks will no doubt slice and dice the budget and its fanciful projections through smart financial logic weaved around technicalities, but if there is a visible easing of the burden on the citizens, the government will be in a comfortable position to fend off the opposition attack.
The PTI government is essentially following the same trajectory: spend, spend, spend and worry about how to pay for it later
This may even entail the government walking out of the IMF programme. No new taxes and no hike in utility rates etc essentially show that the government has calculated it can manage without the IMF till the elections. The massive increase in remittances has stabilised the government’s finances and it believes it will not slide back into the red if the IMF tranches dry up. Perhaps it may not need to walk out of the programme officially. Instead, it could just drag the negotiations for as long as needed and use this time to throw money at the electorate. Just like the PML-N did in its last years.
Yes, you heard that right. The PTI government is essentially following the same trajectory: spend, spend, spend and worry about how to pay for it later. Politics invariably overtakes economics. The cost is always a steep one.
But this is a delayed cost, whereas politics requires instant gratification. The government wants to provide its disillusioned, disappointed and dejected voters the gratification they have been denied since the PTI came to power. Fair enough. Is there a financial basis for this though? The theory that the government peddled in the early days — and pretends to believe in it till today — is that a certain linear logic has flowed through its economic policy via Asad Umar, Hafeez Sheikh, Hammad Azhar and Shaukat Tarin; that all these gentlemen have essentially stayed on the original PTI message and plan and this 2021-22 budget is a continuation of this grand plan. ‘See we told you we were on the right track’, they are now saying with a triumphant smile.
Except, this is not entirely correct.
The fact is that the PTI’s handling of the economy has lurched from one experiment to another, from one approach to another, and from one minister sent packing to another. The government has blundered on projects and fumbled on reforms. For three years, it kept burdening citizens with pain without any major corresponding macro benefits to the economy. The FBR was not reformed, the power structure was not restructured and the state-owned enterprises were not privatised. Finally after three years, politics caught up with the PTI’s economy. The government realised — or perhaps was made to realise — that if its economics continued down this path, the voters would take the government to the cleaners in the next elections. Just as they had in the recent by-elections. So a decision was made: enough of economics, let’s do some politics.
Nothing does politics better than growth. It doesn’t matter how that growth is coming, and where it is coming from, and who will ultimately pay the bills for the growth — none of this matters as long as it is coming fast and strong and flowing thick and lustily like the gravy train it is. It is a familiar path that requires little innovation. The only problem is that elections are still two more budgets away — unless the prime minister pulls a fast one on the opposition — and maintaining this spending spree in the hope that revenue will flow in without further taxation could be a stretch. Economics requires pain, and politics requires a feel-good factor. Feel-good factors win elections. The strategy seems obvious.
Shaukat Tarin may need to thank Ishaq Dar for showing him the way.
The writer is Dawn’s resident editor in Islamabad.
Published in Dawn, June 12th, 2021