Budget for the COVID-19 year: time to embrace realism

The government will be presenting the national annual budget this month. And this year it simply amounts to the proverbial fool’s errand because there is no way Pakistan can balance its books if it is business as usual. 

This is not just because of the debilitating COVID-19 crisis but essentially the outcome of two years of economic incompetence. This will be the Tehreek-e-Insaf government’s second national budget and it is presiding over disaster.

When it assumed power in 2018, Khan inherited an economic growth rate from his predecessor Nawaz Sharif at 5.5 percent, the highest in three decades. The Khan government brought this down in 2019 to 3.3 percent and Hafeez Shaikh, the man in charge of the country’s finances, says the growth rate this year is estimated at minus 1.5 percent. That is negative growth for the first time in 62 years. It is simply the worst ever economic performance of any government in Pakistan’s history.

Few realize it but this is the make or break year for Pakistan in which drafting the national budget, when the country is at its lowest economic ebb, offers a historic opportunity to embrace realism as the principal policy guide for the country to remain solvent. If it so chooses, the Pakistani state can finally address the fundamental wrongs that its deeply flawed socio-economic policies have nurtured, causing so much misery for its 200 million people, keeping 40 percent of them – or 80 million – under the poverty line and 25 million children out of schools. 

Few realize it but this is the make or break year for Pakistan in which drafting the national budget, when the country is at its lowest economic ebb, offers a historic opportunity to embrace realism as the principal policy guide for the country to remain solvent. If it so chooses, the Pakistani state can finally address the fundamental wrongs that its deeply flawed socio-economic policies have nurtured, causing so much misery for its 200 million people.

Adnan Rehmat

The trick would be for the prime minister to match his words with actions. He has, for example, been vociferously opposing lockdowns to contain coronavirus saying 20 million jobs would be lost and 60 million would go hungry if the economy is shuttered. He articulates it as a stark choice between dying of the virus or dying of hunger.

Khan has been saying this after COVID-19 struck Pakistan leaving his cash-strapped government with little flexibility in economic management. But even before that, his government has been reckless in economic policy, such as raising indirect taxes, unleashing the hounds on business and political classes – which are often intertwined – in the name of accountability and even the bureaucracy, which was simply scared into non-governance, stunting management and oversight of economic and social development.

Khan’s government-- India-centric in the security-political context-- has also squandered on the opportunity to transition from an outdated security-centric state to an economic regional leadership position. Through this failure of imagination, the Khan government has all but lost Pakistan the golden chance to replace its traditional hard power identity with diminishing returns, with a more sustainable soft power status with near infinite economic and political dividends. 

Still, all is not lost. The Khan government – if it can muster the political imagination and populist courage – can still change the fate of Pakistan for the better. This begins by acknowledging that the state’s function is people’s wellbeing, not defense of obscure and unproductive ideological moorings lost in the mists of time and nurturing eternal grievances, real or imagined, with its neighbors. COVID-19 has demonstrated this amply already.

Investment in people’s health and education will unleash their productivity and help generate capital wealth. The state must become a facilitator and enabler centered on supporting entrepreneurship and direct taxes instead of a governor of private lives extorting money through indirect taxes thereby encouraging evasion.

What Pakistan needs is a lean government facilitating its political federation of decentralized provinces. This is best done through a dramatic cut in all kinds of non-development budgets, including external defense which can only be strengthened through friendships with neighbors, thereby unleashing regional economic dividends that strengthen the economy-- and dramatically increasing social development budgets. All else has failed, bringing Pakistan to near bankruptcy. 

*Adnan Rehmat is a Pakistan-based journalist, researcher and analyst with interests in politics, media, development and science.

Twitter: @adnanrehmat1