A rolling budget?
What was supposed to be an extraordinary budget, given the unprecedented economic misery brought about by the Covid-19 pandemic, has turned out to be a mere accounting exercise. The Budget 2020-21 has a total outlay of Rs7.13 trillion as against Rs3.70 trillion worth of net federal revenue, leaving a deficit of Rs3.43 trillion which comes to something around 7% of the GDP. That the net federal revenue is not even enough to cater to two major liabilities of the federal government – defence Rs1.28 trillion and debt servicing Rs2.94 trillion, equalling Rs4.22 trillion – speaks of the hollowness of the government coffers as well as Hammad Azhar’s pledge of a “no new-tax” budget.
The total revenue, however, is estimated at Rs6.57 trillion, including Rs4.96 trillion tax revenue and Rs1.61 trillion non-tax revenue. It’s the Rs2.87 trillion worth of provincial transfers under the NFC Award that reduces the federal revenue to Rs3.70 trillion. This estimate is, however, subject to how good the FBR turns out to be in meeting the tax target. While the revenue board’s performance during the outgoing fiscal year raises a genuine concern, the Rs4.96 trillion tax target is itself hugely unrealistic, given the fact that we are in corona times when the businesses are finding it hard to survive, let alone pick up momentum.
And then the government has not been found either to work on genuine fiscal stimulus packages to be announced as part of the budget, meant to lift the economy out of the Covid-splattered mess. The one announced in March, of Rs1.3 trillion, included a big amount the government was already liable to spend in terms of public welfare and pay back to the business community. Even the interest rate is still as high as 8% even though the same has come down to naught in many western countries or been a mere 1-2% in the wake of the coronavirus onslaught. Not to mention the continuing high cost of utilities that flies straight in the face of the PTI pledge of ensuring ease of doing business.
Besides, there were no structural reforms in the FBR during the PTI’s two years in power to ensure that tax targets are routinely met; none of the sick industrial units underwent any restructuring to bring their deficits down; circular debts in the energy sector still stand tall and threatening for want of meaningful intervention from the state; and no development projects were introduced with special focus on mitigating the impact of the rampaging coronavirus.
The budget clearly makes an effort to keep the IMF programme afloat by setting a high revenue target and allowing no genuine relief to the masses or to the business class. Even the government employees have been denied a raise in salaries for the first time in very many years.
The development programme is yet another disappointing story – one that also runs contrary to efforts for meeting the tax target. At Rs1.34 trillion, the development spending estimates are 18% less than in the outgoing fiscal year.
Can one, under the circumstances, expect the government not to come up with additional budgetary measures or a mini-budget later? In fact, with the financial impact of the Covid-19 pandemic merely based on assumptions, the Budget 2020-21 is sure going to turn out to be a rolling budget – one that has to be updated with time because of the fluctuating estimates relating to revenues and expenditures. The budget, in that sense, appears immaterial at this stage – a mere formality.
State of railways