‘Plain vanilla’: Finance gurus weigh in on the 2023-2024 budget

In sum, the country’s leadership and this economic team in particular look devoid of intent and ideas.
Published June 9, 2023

In an uncharacteristically quiet National Assembly on Friday evening, Finance Minister Ishaq Dar presented the budget for 2023-24, with a total outlay of Rs14.46 trillion.

With no new taxes and a marked increase in the salaries of government employees, the budget is “not an election budget” and is focusing on the “elements of the real economy”, said Dar.

Dawn.com reached out to leading economists and commentators for their thoughts on the budget. Here’s what they had to say:

Bridging the deficit through debt

Political economist Uzair Younus is of the opinion that “this budget is evidence that this government has given up on trying to rescue the economy. The goal is to kick the can down the road, let whoever is in power later this year deal with the fallout of this ongoing crisis”.

“All we can conclude from this budget is that deficit financing through debt will continue, and more inflation and pain will be inflicted on ordinary citizens in the months to come,” he added.

Journalist Mehtab Haider agrees, calling the budget numbers “unrealistic”, especially non-tax revenue target.

Economist Ali Farid Khwaja, on the other hand, held that “so far, it looks like an honest budget rather than a populist or unreal budget which the previous ones [have been].”

Fahad Rauf, head of research at Ismail Iqbal Securities, was of a similar view. “This does not seem like an election budget full of populist action, other than increasing salaries for government employees. However, I will need to see the budget statistics for a test of logic.”

“So far, I don’t see any major deviations from the International Monetary Fund (IMF) path.”

Some good but imperfect news

“The budget speech by the finance minister reflects that the economy is probably intended to move towards more liberalisation with reduced taxation, import duties, and easy loans for productive activities — which is not bad. There are many encouraging initiatives, such as eliminating import duty on solar panel batteries and imported seeds, and no new tax on industry and agricultural machines,” said economist Dr Asma Hyder.

“It’s good to see that freelancer and IT exports will not be taxed. IT will get small and medium-sized enterprises (SME) status and will have to pay very concessional pay. This is good news for youth and nascent entrepreneurs. The government is hopeful of finalising the staff-level agreement with the IMF, but even with the IMF programme, we must acknowledge our fragile fiscal space. Thus, this expansionary budget will be very challenging for the government in the coming days,” she warned.

“A few popular but unnecessary measures, like the laptop scheme and an increase in the development budget of the Higher Education Commission (HEC), could be avoided. A better idea was to divert this budget towards primary and secondary education, which is terribly affected due to the recent floods.

“The issue of debt payment is not presented clearly and is somehow ambiguous. However, the defence budget increased from Rs1450bn in fiscal year 2022-23 (FY22-FY23) to Rs1804bn in FY23-FY24 without explaining this unnecessary increase,” added Hyder.

No plan for recovery

Economist Ali Hasnain argued that the budget seems to be reminiscent of previous PML-N policies, with no new ideas for a road to recovery.

“The finance minister’s remarks over the last two days and the broad strokes of the federal budget revealed today betray a failure on the part of the present government and the broader power elite of this country to face and understand an economic crisis that continues to build with no end in sight,” he said.

“At a time when the country needs clarity on the plan for recovery, he chose to spend a significant part of his speech laying the blame for our problems on an opposition removed from power more than a year ago, and recently routed from political relevance.

“Yesterday, the minister repeated his long-standing belief that the rupee should appreciate citing a statistic — the Real Effective Exchange Rate (REER) — that he consistently ignored in his previous tenure and claimed not to understand as recently as last year.

“Today, the revenue measures revealed — such as an amnesty on declaring the source of certain remittances, an ad hoc ‘windfall’ tax, and creating taxes for non-filers’ cash withdrawals — carried echoes of past PML-N measures that created economic distortions and failed to fix structural problems. Difficult but obvious efforts to reduce tax evasion, energy theft, and public losses remain evasive.

“In sum, the country’s leadership and in particular this economic team look devoid of intent and ideas.”

‘More of the same’

“Dar presented a Rs14.5 trillion tax-free election budget without backing it up with convincing revenue streams,” senior journalist Afshan Subohi said to Dawn.com.

“The promised relief measures — increase in Benazir Income Support Programme to Rs450bn, jacking up the minimum wage to Rs32,000 from the current Rs25,000, 35pc ad hoc increase in the salary of government employees of grades 1-16 and 30pc for grades 17-22 public officers, 17.5pc increase in public servant pensions along with certain concessionary schemes for the youth — may be good but it leaves the majority to cope with the economic difficulties on their own.

“There are a little over three million government employees, less than two per cent of a population of about 241 million dealing with historically highest inflation levels,” she noted.

“The minister noted political instability as one of the key factors responsible for the economic meltdown but said nothing as to what the ruling government has done to improve the future predictability. The government could have announced the probable date of the dissolution of the national assembly to curb speculation,” she added.

“He hoped for the revival of the IMF programme based on the verbal assurance given by the MD but did not share how the country will deal with the crippling $25bn debt liabilities if for some reason it fails to materialise.

“All in all, the budget is more of the same; high on promises and low on a trust-inspiring game plan to actually deliver relief to the people and better business environment to growth agents.”

Additional input from Reuters.