Budget — a challenge for Govt

AS date for announcement of the federal budget for the
next financial year is nearing reports trickling down from
various sources speak of enormous challenges for the Government in maintaining the balancing act of meeting expectations of the people especially fixed income groups and demands being put by the International Monetary Fund (IMF). According to media reports, IMF has asked Pakistan to undertake massive fiscal adjustments of Rs1.150 billion to bring down primary deficit at negative 0.4 per cent of GDP for the upcoming budget 2020-21 post COVID-19 pandemic. It has proposed freezing all major non-development expenditure heads, including salaries and defence, in order to bring down primary deficit from projected negative 2.9 per cent in outgoing fiscal year to -0.4 per cent of GDP in the next budget for 2020-21.
Pakistan was already facing difficulties which have been multiplied by the impact of the Covid-19 on its economy as well as masses and it was rightly declared by some ministers that 2020-21 would be a Corona-related budget meaning relief for those affected by the crisis and measures aimed at stimulation of the economic activities. There is no doubt that revenue is shrinking because of economic stagnation caused by the virus but it would be next to impossible to make huge fiscal adjustments of 1,150 billion rupees without compromising core interests of the people. We have been pointing out in these columns that the mantra of cutting non-developmental expenditure further should come to an end as successive governments have long been pursuing this policy, which has badly affected performance of the ministries and departments. Given tension on borders and threats to the security of the country, Pakistan can hardly afford to freeze defence expenditure. Similarly, in view of record price-hike that people of Pakistan witnessed during the ongoing fiscal year, it would be unjust not to raise salaries and pensions as their incomes stand eroded.
There are also reports that that the stalled IMF programme under the $6 billion Extended Fund Facility (EFF) could only be revived provided the government demonstrates its ability to present and pass the next budget for 2020-21 to align with the IMF’s envisaged macro-economic framework but we believe the IMF should have realized woes of the Government in the backdrop of highly negative impact of the Coronavirus. It is because of undue interference and dictation that people of Pakistan wanted every government to stay away from IMF programmes but rulers always opted for the easy path of securing loans to bridge deficit on ad-hoc basis. This policy should come to an end now as IMF programmes lead to compromise on political and economic sovereignty of the country. Instead of proposing a freeze on defence and salaries, the IMF and other donors should provide debt relief to the third world countries that are bearing the brunt of the Covid-19 because of their vulnerabilities. Meanwhile, in a positive development, the Annual Plan Coordination Committee (APCC) on Thursday approved national development outlay of Rs1.319 billion for next budget 2020-21 and recommended to National Economic Council (NEC) for launching Rs.100 billion special programme to combat COVID-19 with cost sharing of 50:50 both by the Centre and provinces. This would, hopefully, give some boost to the economic activities and generate employment opportunities as unemployment rate has soared to 8.53% in the second year of the present government.