Truth be told, the economy would be as good or as bad as it is under any government. IK is lucky to have missed the ignominy of having to subscribe to such devastation. In fact, he may have only made matters more complicated for the state, the successor government and the people, by his decision to lower prices at the pump and in electricity tariffs while the whole world and all economic logic literally cried out to do just the opposite. Why he was able to do so is a matter of conjecture – for now, what matters are its implications and the continuing threat of insolvency that this country faces – but it has cost the country and its people a gigantic 600 billion PKR in subsidies, levies and taxes. Keep in mind that all governments derive their revenue from essential public services at all social levels – oil, gas and electricity. Water is generally treated as a free resource and is neither taxed nor priced. That we are now a water-stressed nation on the brink of starvation is no coincidence.
The budget is based on one and only one qualification; that the IMF will resume its stalled program and favor Pakistan with an extension and an additional two billion dollars. If this one condition is not met, this budget and the whole crucifix on which it rests will dissolve into chaos first, then into nothingness. We are already chaotic. The way this government and Miftah Ismail – carrying the cross – are so desperate for a deal you can tell how crucial and critical this act of appeasement of the IMF and securing our economic future is. But what if the IMF doesn’t do the trick, should be everyone’s main occupation in the current government. If that were to happen, we would never have known more difficult times.
We won’t have the money to import our energy needs — oil and gas. This will put the whole economy on hold. Can friends still come and help? They can, except that it will be necessary to resort to strict rationing, to feed only what is productive and essential. We may have large areas that may not receive a volt of electricity for days. And what about the capacity payments in USD that we have accepted under sovereign guarantee? Even if IPPs and power generators agree to deferred payment, it will add to the already high energy debt pile. Say they all become angels and produce power with the free fuel friends give us to get through, say, the next three years, and say we produce for export like never before and grow crops like never before and reduce our imports to the essentials. raw materials, machinery and items that will help propel production and earn enough dollars to pay our debts and survive at subsistence level – and not steal from government coffers; we will always need dollars to pay for imports to enable such face-saving productivity. I guess the elephant in the room – the repayment of accumulated debt – which is about $21 billion for the next fiscal year is somehow and magnanimously postponed by our donors.
Look at the numbers proposed in the budget. It has large parking allowances seemingly for specific purposes, but can easily be repurposed when the going gets tough. We can’t waive debt payments unless we can get our donors to agree to defer or defer – it’s not impossible; yet there will be some that will have to be paid. The next big allocation is for the NFC prize to the provinces where the most money goes. It’s time to tighten our belts and exert more control over what is absolutely essential and to what extent. For the next two years, create an exception and let the federal government directly fund the projects that are essential. General infrastructure development can wait; health and education cannot. The price can thus be adapted to meet only the essentials, controlled and monitored for the next three years by the centre, and not be the subsidy it has become. Provinces must assume the role of increasing their revenues to support what they already have — 18e The amendment requires them to do so. Provinces must produce and return any surplus they are able to muster.
There is a PKR 1.5 trillion subsidy and tax relief woven into the system for the privileged elites and the wealthy in this country. It’s time to renegotiate their unearned privilege and ask them to take a hit or two. In fact, they must be able to contribute more to the full tax and take responsibility for social security through charitable initiatives for the oppressed and the most oppressed. Similarly, there is an $800 billion portion of the PSDP allocation. When the choice is between food to survive and building roads and flyovers or handing out parliamentarians, that extravagance can be put on hold. This makes a significant number when added. It is clear that these figures are based on loans, but most can still be generated through local resources. In fact, the budget estimates that approximately 52% of revenue comes from local means. If the deadlines are extended for a year, that leaves us enough to support a reasonable national economy. If that can’t be the case, it’s time to relearn austerity and frugality in the face of the rapacious debauchery of borrowed money. For it to be effective, we will have to live simply and lead by example. Produce, produce and produce — except children — and save, save and save. This should be our mantra.
And finally Defense which sees significant allocations each year after debt and NFC payments. There is no doubt that an assured defense is our imperative, but we are satisfied with our composite capability. He is equipped to fight multiple threats and retains the punch required to parry an offensive intent. We have three options: keep what we have where it stands — pretty formidable; continue to add more muscle and strengthen its deterrent effect – this will require the continuation of ongoing force development plans; and third, to simultaneously design and develop structures and capabilities for future warfare with appropriate technologies and capabilities. This is basically how a strength development plan is structured. Given our struggles between continuous development and survival, the essential minimum should be resorted to only in all areas that should support capacity and capability as it exists. We can effectively deter, confront and respond to any adventure within our core mission. Time to stick with it until the weather and tide allow. It can save us valuable resource.
Finally, there is the case of SOEs or PSEs which keep sucking 1500 billion a year into a black hole. A year may be too short to dispense with, but the effort must begin in earnest to get rid of those existential albatrosses which, with debt and energy, will lead us into the dreaded hole. Significant savings can be made. It is time for the economy and mentalities to restructure and think and act differently. This will keep Pakistan vibrant.
Published in L’Express Tribune, June 17e2022.