Is the incumbent government righting the wrongs of the erstwhile government with the presentation of the mini-budget? Was the mini-budget sine qua non to stabilize the economy? Was the presentation of the mini-budget only way out to address the conundrums of the lack of the wherewithal the Pakistani economy is facing at present? Would the mini-budget be efficacious in curtailing the whopping twin deficits? Would the mini-budget work like a magic wand? Does the mini-budget stipulate documentation of the undocumented sectors of the parallel economy? Is the mini-budget an old product with innovative packaging? Is it something tested over and over again by the previous governments as a kind of window-dressing? Was there any need for a mini-budget?
Some critics presume that fixing the Pakistani economy is a distant mirage, at least with the given situation when foreign exchange reserves are at the critical level, the current account deficit is unbridled, fiscal deficit is nearly 7% of the GDP, trade deficit is staggering $37 billion and the debt repayment due this fiscal year is $8 billion.
Where there is a will there is a way. The government presumes that the mini-budget would work and the dust would settle down sooner rather than later. The government seems determined to take the economy on the growth trajectory. However, the doubts prevail everywhere. The perception by the ruling class is that the budget presented by the previous government was detrimental to the economic health of the country. The government does not seem to be working on the debt-driven growth as done by the erstwhile governments.
The emphasis in the mini-budget seems to be on two major fronts: dwindling imports to curb the current account deficit and expediting the revenue streams to bring about the realization of the promises made during the election campaign. The incumbent government seems somewhat restless, perturbed, direction-less to some extent as well as determined and obstinate to prevail.
In case the measures taken in the mini-budget such as endeavors to slash import bill work, how would government ensure that the targeted revenue is achieved and the economic activities do not get a negative impact? The opposition claims that the measures to curtail the imports were taken by the former government as well in terms of imposing regulatory duties which were opposed by some circles of the business community. Further, the ban/duty enhancement of certain products may bring about the reduction of two to three billion dollars in the short term, however, it does not seem a sustainable solution.
The critics are all out to lash at the government for the recent price spike in the gas and electricity, which might stifle the economic growth. Moreover, the speculation of rupee depreciation is further depressing the business sentiments since in spite of the clarification by the Finance Minister that there is no final decision whether to go or not to go for IMF program, the situation seems somber.
The recent news of Saudi investment of $10 billion in CPEC projects might satiate the critics in the meantime. However, there is widespread concern about the trade imbalance with China. Imports from China are at over $15 billion and exports are at meagre $1.5 billion. The government needs to revise the Free Trade Agreement with China and should demand the concessions equal to ASEAN countries, which would surely prove beneficial in the short and long run for the economy of Pakistan. Pakistan may look at Malaysian stance exhibited recently about the level playing field.
Does the mini budget address the issue of the acute shortage of irrigation water for the Rabi season beginning from October. 35% shortfall of water may dent the agriculture output which would adversely impact the economic growth of the current fiscal.
The mini budget does not stipulate the steps to be taken against 4,000 Pakistanis who have been evading taxes for decades and have invested profusely across the world. Merely issuing notices and waiting for the wherewithal to pour in the government coffers seems an outdated strategy.
Last but not least, prior to the presentation of the mini budget, it was being widely thought that the government is intending to approach IMF and the mini budget has been crafted in line with that planning. Increasing energy prices, curtailing twin deficits, working on austerity etc. are all what IMF asks for in return to the agreement for the loan.