The budget and after
THE banker-turned-finance minister appeared nonplussed as he responded to the questions on Budget 2024-2025 that has burdened the already weighed-down salaried classes while protecting the privileged. He could only offer words of ‘sympathy and empathy’ to the affected people. His defence of exemptions extended to the top civil and military bureaucracy and retail businesses was equally superficial.
But why should one blame the rookie finance minister for the budgetary jugglery we have witnessed? He is just the messenger of bad news. The budget reflects the demands of vested interests that are not prepared to change the status quo. The untouchables are not to be touched. Fleecing the oppressed remains the name of the game.
Indeed, the increase in tax revenue, wherever it comes from, will help secure a new IMF financial package and keep a broken economy afloat for a while. But the budget, which was approved by parliament last week amid some protesting voices, doesn’t even hint that the incumbents are interested in carrying out the promised structural reform needed to steer the economy out of its perpetual state of crisis.
It is largely a patch-up job that is not likely to be sustained. A long-term vision for economic revival is missing. The prime minister has admitted that the budget was prepared in ‘collaboration’ with the IMF. So, where is that much-touted home-grown economic reform programme? It seems to be non-existent.
While a section of the population has been laden with more taxes, no real effort has been made to widen the base. There has not been any effort to contain the burgeoning current expenditure. Instead, there has been a substantial increase in administrative expenses. The belt-tightening has certainly not been across the board.
The untouchables are not to be touched. Fleecing the oppressed remains the name of the game.
These measures won’t help improve the environment for domestic investment, let alone clear the way for those (illusory) billions of dollars in foreign investments. A collapsing economy is a disincentive for all kinds of investments. There is still no clarity on the disinvestment of state-owned enterprises, which constitute the biggest financial drain.
The budget is not only bereft of an economic and political vision, it also shows the lack of capacity to think beyond narrow interests. The budget has exposed the fault lines within the existing power structure. The continuation of exemptions to the civil and military bureaucracy is a manifestation of the latter’s hold on the power matrix. Similarly, the politically powerful agricultural and retail sectors are left out of the tax net.
Sure, some exemptions have been removed because of the IMF’s pressure, but there is still a long list of protections that have not been taken away. The finance minister says that work is in progress, yet there is no sign of any move to rationalise the tax regime. There is no effort to bring the rich and powerful into the tax net.
Not only is there an economic cost to be paid for a flawed policy, there are also political consequences for a tottering coalition administration. The increasing burden of taxes has fuelled public discontent, which may not be contained. With runaway inflation, public outrage has reached new heights. Can a weak coalition government, riven by internal divisions, deal with an increasingly volatile situation? Certainly not.
It has been a little over 100 days of drifting for the Shehbaz Sharif government. The coalition of disparate political groups has yet to chart a clear economic and political direction. It is yet to find its moorings, despite the fact that the same coalition had previously been in power for more than 18 months. The conflict within the Sharif family has also been a major cause for the persisting confusion.
It is apparent that with his elevation as deputy prime minister, Ishaq Dar is now virtually guiding the country’s economic policy. It is the same old policy that was largely responsible for Pakistan’s economic downslide. The powers of Finance Minister Muhammad Aurangzeb have been increasingly curtailed. With Dar presiding over meetings of the Executive Committee of the National Economic Council, the finance minister’s position has been further undermined. Dar is also the head of the privatisation committee, as well as the foreign minister.
Nothing could be more ridiculous than such unprecedented concentration of powers in the hands of one person, who has nothing much to show for his past position as economic czar. The involvement of the military leadership in economic policy planning has made things more complicated. The dichotomy of power has also been a factor in the Sharif government’s failure to build a long-term vision of economic recovery. The latest budget gives no hope for change. The Dar economy is very much back in action.
No wonder the finance minister appeared completely clueless at the post-budget media talks. It was embarrassing for him when more tax was dumped on the salaried classes against his assurances earlier that there was no such decision. His ‘sympathy and empathy’ for the affected salaried classes were an embarrassment.
The economy cannot be separated from politics. Continuing political instability has been a major cause of the economic slide. The existing power structure, with the security establishment’s dominating role and elite capture, has been a major impediment in the way of change. Questionable legitimacy makes it harder for the government to undertake any meaningful reform in the system. Worsening political confrontation has rendered parliament virtually irrelevant.
Not surprisingly, there was no real debate on the budget in the National Assembly. Even if there was a serious comment, it was drowned out in the commotion. In fact, no political party — ruling or in the opposition — has any economic vision to take the country out of the current morass. There is not only a need for a charter of democracy but also a charter of economy among the political forces to put the country on the path of progress. There is also a need for a serious dialogue among all stakeholders to take the country in the direction of economic growth.
The writer is an author and journalist.
X: @hidhussain
Published in Dawn, July 3rd, 2024