Asad
Umar is gone but the budget is still on schedule as Dr Hafeez Shaikh prepares
to present it next month. Most insiders say it will have as many as over Rs600
billion worth in new taxes, which include direct and indirect taxes. This would
be the PTI government’s third budget in nine months.
The government is also poised to announce its
own, kosher version of a tax amnesty scheme. Economic reporters say it might
add around Rs250 billion to the national kitty. Tax amnesty, however, is
supposed to be announced before the budget and before the IMF program is inked.
The fate of the tax amnesty is in a domain unknown as it would be purely on the
opposition benches to respond, especially if it is announced as a presidential
ordinance. The Opposition, which enjoys majority in the Senate, has the power
to strike down the amnesty scheme if it is announced as an ordinance by
invoking Article 89.
As the PTI government scrapes for every extra
rupee, ministries, divisions and provincial governments are being asked to
quickly surrender unspent budgets to help the fledgling finances of the
federation. The provinces, especially Sindh, has already been complaining that
the federal government has yet to pay their due share of the NFC award going
into the tune of over Rs120 billion.
This year, during the first nine months,
Pakistan’s budget deficit touched Rs1.6 trillion or 4.2 percent of the size of
the national economy, as the Imran Khan’s administration failed to generate
revenues to meet debt servicing and defence requirements of the country. In the
meantime, the government plans to abolish concessional customs duty regime in
the next budget to get an additional Rs100 billion as the IMF keeps telling
them to jack up revenues. If the government goes ahead with the measure, it
will increase the cost of textile machinery, agricultural equipment, fertiliser
factory equipment and power generation plants. All of these will have huge
implications.
IMF has said that Pakistan’s $27 billion
external debt will mature in the next two years while Pakistan’s debt-to-GDP
ratio will soon be reaching 77 percent, the highest ever. That also means that
because of the loan repayment and financing needs of the current account
deficit, the country would be needing between $46 billion to $ 50 billion to keep
its economy afloat.
How will we do that when most international
bodies agree that in next few years, Pakistan will be the sick man of South
Asia with its GDP dipping to half of what it was just the last financial year?
Sources close to the PTI government say that
besides the $6.5 billion Pakistan will get from IMF, the country might get some
funding from a consortium of World Bank and Asian Development Bank and also
float some international bonds supported by the consortium to help the
dwindling economy.
Just before the IMF program, the rupee’s
depreciation might hit a new low as oil prices, too, are going up because of
the Iran-US tensions.
Pakistan’s revenue black hole that was Rs3.3
trillion three years ago now has reached almost Rs5 trillion or almost 26
percent of the GDP.
Given the situation, with free fall of the
rupee, the economic conditions will dire, something Imran Khan’s administration
would not like to see.
“We are in a pretty bad shape. The prime
minister has almost lost control. He feels angry and jittery and so do we,”
confided a federal minister requesting anonymity. “We have nothing to offer in
terms of giving people hope, except perhaps blasting the opposition. The
honeymoon is over. What else do we do?” he said.
Chinese officials, who are known to say
nothing in public about their resentment, are also venting their frustration
with the slow progress of reforms and bureaucratic hurdles. Many good things
have happened during the visit of Prime Minister Imran Khan in Beijing but the
fact that Foreign Office could only manage two meetings – with Tajikistan and
Ethiopia’s heads of the government- says a lot about the dwindling influence of
Pakistan. Out of 37 governments represented by their heads, Pakistan also
failed to materialise a meeting with Russian President Vladimir Putin.
“The PTI pledges to raise 10 million jobs and
build five million houses. This will probably not materialise and instead,
there might be unprecedented inflation and massive hikes in prices of
utilities. Only God knows, how long people will sustain these hardships. Who
knows what straw will break the camel’s back?” said an analyst in Islamabad
about the impending economic disasters headed towards the land of the pure.
All this is happening at a time when
Pakistan’s fate hangs in balance when it comes to Financial Action Task Force
(FATF). The next three months are crucial as things have the potential to get
worse. “If God forbid, we fall on the blacklist then things may spiral out of
control. How this will government manage things is unimaginable,” said a
veteran analyst.
At a time when opposition parties are pushed
to the wall, the announcement by the DG ISPR about allegations against the PTM
on April 29, created more political uncertainties with Maulana Fazal Rehman of the
JUI threatening to march on Islamabad after the month of Ramazan. Nawaz
Sharif’s fate and that of his daughter Maryam Nawaz remains uncertain. The
Punjab remains unstable with more cracks in the ruling coalition and the PPP,
led by young Bilawal Bhutto Zardari, remains defiant.
At a time when Pakistan is going through the
worst economic conditions and growing diplomatic isolation, the internal
political climate gets more combustible by the day with censorship and
self-censorship hitting new levels. “We need some safety valves to release some
pressure real quick,” said an Islamabad veteran about the emerging scenarios.
