The recently unveiled fiscal budget in Pakistan has raised concerns due to its uncertain measures and potential implications for the country’s economic stability. With a focus on securing undisbursed funds and overcoming market anxieties about a sovereign default, the government’s approach has drawn criticism for its fiscal irresponsibility and lack of strategic planning.

The budget aims to strike a balance between certain measures that appeal to the general public in anticipation of the upcoming elections and the stringent conditions set by the IMF as prerequisites for the continuation of the nearly concluded $6.5 billion bailout loan programme. The government unveiled the FY24 budget amidst unprecedented uncertainties both domestically and globally. The economy is facing a classic case of stagflation, characterized by almost zero percent growth, increasing unemployment, and surging price inflation.

Given this backdrop, many had high hopes that the budget would present a well-thought-out strategy to guide the country out of its current crisis and towards economic stability and sustainable debt management. However, the government’s oversight of certain measures, such as the documentation of the economy and the privatization of loss-making state-owned enterprises (SOEs), has prevented the crisis from being transformed into an opportunity. In Finance Minister Ishaq Dar’s budget speech, there was not a single mention of how the government planned to extricate the country from the current economic quagmire.

The government’s intention to secure a portion of the $2.5 billion undisbursed funds is aimed at alleviating market concerns about a potential sovereign default. However, the effectiveness of this strategy remains uncertain. To begin with, the budget demonstrates fiscal irresponsibility, as no measures have been taken to control the budget deficit. Even if the targets of Rs12.16 trillion in tax and non-tax revenue and 3.5% GDP growth are achieved against all odds, the fiscal plan outlined in the budget will result in further debt accumulation.

The expansionary nature of the budget, driven by significant allocations for development projects amounting to Rs2.7 trillion, energy and other subsidies totaling Rs1.07 trillion, a substantial increase in government employees’ salaries (30-35%), and similar expenditures that could have been reduced or eliminated, leads to a worrisome fiscal deficit of 6.5% of GDP. This contradicts the IMF’s projected deficit of 4% for the upcoming year under their programme.

This situation may pose problems in the ongoing negotiations between Islamabad and the IMF. If the lender does not agree with these figures, the government will need to revise its spending targets. Additionally, the budget fails to provide a clear plan on how the government intends to fulfill another crucial IMF requirement: the commitment to cover the $6 billion financing gap.

If the sole objective is to revive IMF funding, Finance Minister Ishaq Dar has not presented a credible plan to the lender either. We are facing challenging times that demand a paradigm shift in how we manage our debt-ridden economy. There are no quick solutions. If the government believes that it can revive the competitiveness of a weakened economy and stimulate growth solely through substantial borrowing for development initiatives and the distribution of freebies, it is mistaken. Pakistan must make difficult choices to overcome the current crisis, yet the government has shown no inclination to make these necessary decisions.

A country’s budget is intended to be more than just a statement of income and expenditure; it is, in fact, the most crucial economic policy document that shapes and guides the economy towards desired outcomes. Unfortunately, this budget falls short in fulfilling that role.

There is a noticeable absence of any mention regarding the State-Owned Enterprises (SOEs) that continue to drain the national treasury, as well as the urgent need for reforms in the energy sector. These pressing issues demanded immediate attention from the government, and it was expected that the budget would address them explicitly, providing concrete plans and timelines to effectively and meaningfully tackle these significant sources of fiscal imbalance.

Attempting to achieve a current surplus by curbing imports is a counterproductive endeavor that will only exacerbate our economic weaknesses, rather than alleviate them. Such an approach is self-defeating and fails to address the core challenges we face.

In conclusion, Pakistan’s fiscal budget for the upcoming year raises serious concerns about the government’s ability to navigate the current economic challenges. The absence of measures to curtail the budget deficit and the expansionary nature of the budgetary targets risk further debt accumulation and undermine efforts for economic stability. To overcome the crisis and revive the economy, Pakistan must make tough choices and prioritize strategic decision-making. Without a paradigm shift in approach, the government’s reliance on borrowed development stimulus and superficial measures may prove insufficient to stimulate growth and revive competitiveness. It is imperative for the government to embrace necessary reforms and demonstrate a commitment to addressing the root causes of the crisis for long-term economic sustainability.