ARTICLE: The days for being imaginative are upon us; after all Budgets and economic reviews in a developing nation, even under normal circumstances, need more imagination than common sense. Only with the help of science fiction can you stretch and balance a budget, when resources are scarce and there is always too much on your plate to do.
And these are anything but normal times. Ever since March 2020, when Corona invaded Pakistan and the country got engulfed in the Virus Wars, Economic planning of any kind, and budgeting for expenditure, became a footnote in the things to do list of the State.
And you cannot blame the Government for doing that. The Virus Wars are nothing like what the world has ever seen before, at least in my lifetime, and the extent of devastation still remains unclear. There are some estimates that things may get horrific for Pakistan by August 2020 and that the suffering may continue till end of the year. Allah SWT may keep Pakistan and Pakistanis safe Aameen.
A small clarification before continuing with the Budget- the quest for the "Key" to economic growth will continue next week, In Shaa Allah, so keep last week's column handy next week.
Anyway with corona in the forefront, if the Economic Survey 2020, divides the fiscal year in two periods, before and after Corona, and then argues that the stability achieved during the first 9 months got reversed by the emergency measures necessary to fight the Virus Wars after March 2020, then you have to give the finance team the benefit of the doubt. Admittedly, there can be multiple "What if" scenarios for where the economy was prior to Corona and its trajectory, nonetheless they all become irrelevant considering the quantum of uncertainty associated with the Virus Wars.
Even in the case of the Budget, there has been a continuing critique of the revenue target set for the next fiscal year, but that in any case, apparently, is a balancing figure. Frankly, I for one, have no suggestions to improve upon the balancing act, simply because it would not matter; given the uncertainty, the reality more likely than not will be very different from any budget that you dream up. And maybe it is even for the better, who knows. In any case when have we ever adhered completely with any budget in the history of budgeting ever!
It is very easy to criticise, almost as easy as it is to lie- keep it short and simple, but say it loudly, and all the "Know it All" who would not want to admit that they know not, will believe you and join you; brainless mob power! And you won't even need any evidence to prove anything! On the other hand, coming up with a viable alternate is what everyone will fail at, simply because that requires hard facts and reasonable assumptions, which are just not out there.
In a situation where history can provide no lessons, in fact becomes irrelevant, and where it is impossible to firm up assumptions for future projections, given the continuing uncertainty, balancing a budget required more than imagination. And things get even dicier when you consider that the entire world is in a depression and there is still an uncertainty about how bad things can get.
The optimist in me would like to hope and dream, that things will revert to normal in the shortest period of time after the Virus Wars end and that too very soon- however I am not an ostrich.
So while the government did what they had too, going forward there are concerns which require serious thought.
The biggest concern is that federal revenue receipts are no more sufficient to meet our debt service obligations for the year; in 20-21 debt obligation is estimated at a whopping Rs 4.1 trillion. That means that all other expenditure-defence, development, government running, subsidies-is being met through debt.
Pakistan's total debt and liabilities, after accounting for revised budget estimates for 2019-20 could be nearing Rs 44.5 trillion by 30 June 2020. And according to the Budget for 2020-21 we may well be borrowing another Rs 5 trillion in that year.
We need an urgent plan to bring this debt mountain lower.
It is indeed a great achievement to have brought the CAD down, but this is not the time to get complacent. Even if only US $ 3 billion, it still adds to the country's total external debt of US $ 110 billion.
We need to adopt a mercantilist approach, and strategise to start paying this external debt.
Our agriculture produce is declining, either because of a stagnant cropped area, water stress and low yields; my prediction is that post Corona Virus, countries which feed the world shall rule the world.
We need serious public investment in agriculture.
Manufacturing as a percentage of our GDP has come down to 12.48%; comparably livestock is 11.69% of GDP. If this trend continues we will have more livestock than manufacture within a couple of years; not a good position to be in.
We need to invest public resources in a strategy of planned industrialisation and protectionism. And we should probably, on the sidelines, carry out a census of the livestock in the country; relying on a 2006 census can spring sudden surprises, good or bad.
That perhaps was a precise and concise commentary on the budget and the economy. In conclusion one can only agree with the PM- this time around preparing the budget was not easy.
(The writer is a chartered accountant based in Islamabad. Email: [email protected]. The views expressed in this article are personal. The views are not necessarily those of the newspaper)
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