EVERY year, during budget season, a debate starts between politicians and economic experts regarding the policy direction.

The budget calculations are tricky and complex. Even the best experts working in the field of fiscal economics and monetary management remain in doubt over budget statistics. There is a weak data base and a shortage of expertise in empirical analysis. The friction across political parties on various budgetary initiatives is common. Economists are also divided on many issues.

In Pakistan, budget related policy making is mostly done in isolation. Experts working in different policy components rarely have full picture. This compartmentalism can lead to a closed-end tunnel.

Budgetary policy options are neither backed by authentic empirical evidence nor justified by best practices. Policy diversification is severely lacking across the region. Sometimes non issues command too much attention.

The core stakeholders in the corporate sector have a circle of influence for gaining tax and credit benefits while government servants exert pressure for salary increase. Similar kind of odd pressures and persuasions from diverse stakeholders distort the exercise of budget making..

Budgetary policy options are neither backed by authentic empirical evidence nor justified by best practices

One can easily observe the policy inconsistency in the symmetry of budget sections and lack of cohesion across statistics. IMF no more rely on the ‘trickle down concept’ alone but we continue to depend on it. The economic growth is measured by the rising fortunes of the rich class while poor are provided temporary relief through Ehsaas programme. A policy for the middle class that has enormous potential is missing mostly. Rigorous analytical work is required for a good budget. There are many economic activities that are not accounted for in the budget.

Standard academic research needs to be given the importance it deserves. The best strategy is to arrange a series of consultation workshops of key stakeholders in collaboration with academicians, independent thinkers, and business people. Similarly, all provincial and district governments can be taken on board for understanding grass root level issues. Moreover, chambers, business associations, media groups, and commercial attaches working in various embassies can be heard. Special research groups can be constituted for identifying workable plan on revenue and expenditure sides.

A budget sets the course for business, commerce and trade. A minor mistake can have long lasting consequences. As per 18th Constitutional Amendment, alignment of budgetary estimations needs to be maintained with provincial budgets. A clear cut policy appendix must be available in the federal budget regarding the share and contribution of provinces in different accounts and heads.

The policy options of an annual budget should be aimed at fulfilling national pledges and international commitments. There is a serious need for developing a rational mechanism for boosting provincial revenue shares for which the process need to be made more inclusive engaging all political parties. The country can’t afford political nor economic polarization. Political stability is a proxy denominator of economic stability. It has connection with the policy framework of annual budget which is perceived as a ‘grand test’ of politicians and economists. Policy considerations for poverty alleviation, food security, rural development and social harmony are important. The focus should be on removing market distortions and removal of inefficiencies.

(The writer is Professor of Economics, Dean, Faculty of Social Sciences PMAS Arid Agriculture University, Rawalpindi)

Published in Dawn, The Business and Finance Weekly, July 12th, 2021