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  • A common man’s perspective on the budget for the fiscal year 2024-25

The budget speech delivered by the Federal Minister for Finance and Revenue, Muhammad Aurangzeb, was received with cautious optimism and a perennial sense of pessimism among the concerned quarters.

An overall view of the budget reveals that the message conveyed is simple: Not much is going to change this year either.

The total outlay of the budget is a significant Rs18.9 trillion. Tax revenues placed at Rs7.2 trillion do not inspire confidence. A fiscal deficit of Rs1.8 trillion means that many sectors, including health and education, will remain neglected. The GDP growth rate lingering around 3.6% implies a cycle of contraction and stagnation. Additionally, the projected inflation rate of 12% means the rupee will be devalued once again. This will have a significant impact on the common man who lives within a day-to-day budget. It raises several concerns and questions about the feasibility of the budget and the underlying intent behind it.

For instance, high inflation is always a warning sign of an impending disaster. Having a hundred rupee note now means having only about 88 rupees.

Approximately 40% of the Pakistani population lives below the poverty line, earning an average of Rs12,000. For them, this budget would mean their struggle for survival worsens every day.

Currency devaluation is another pressing concern, which will seriously strain the lives of middle-class people as well. Pakistan’s rupee depreciated by 20% in 2023 and remained the worst-performing currency in Asia.

When delving into the figures, curiosity turns into disbelief.

For instance, the development sector has received no attention, with education and health being excluded from the list of concerns.

Unemployment, already at 8.4%, will further increase as job creation is severely impacted by the austerity drive shown in the budget.

The tax revenues are overly optimistic and may contribute to economic instability. Additionally, reliance on IMF loans promises to perpetuate the cycle of debt.

If the top 10% earners are taxed 5% more, it could generate an additional revenue of Rs200 billion.

Furthermore, Rs1.5 billion has been allocated for social welfare programs under different heads like the Benazir Income Support Programme (BISP), poverty alleviation, and the Ehsas programme. This amounts to about 5% of the total budget.

Considering Pakistan’s economic challenges, experts believe it should have been 10% of the total budget at $125.

Common sense in economics dictates that a budget riddled with a fiscal deficit is promising only when it is drafted with the sole intent of investing in sectors capable of boosting jobs and increasing infrastructure. It should also finance essential public sector services like healthcare and education. Additionally, its objective should be to fund research projects that pay dividends in the long run, helping boost investment and attract foreign investment. Unfortunately, none of these priorities seem to be at the heart of this budget, as usual.

It appears to be a budget that seeks to sculpt Pakistan’s trajectory in accordance with the wishes of the IMF, increasing taxes, downsizing public spending, and leaving the market in a state of uncertainty. The opposition and the people have displayed furious skepticism over the budget’s proposed feasibility and the reforms it pledged to bring to life, as usual.

While the previous budget aimed at economic stabilisation with a focus on people-centric policies like subsidies of 14.5%, the latest one for FY 2024-25 diverges from its former priorities, revising subsidies down to 12.8% and introducing a slew of taxes that will create new challenges for the common man trying to cope with these economic shocks.

After all, when seeking a resort to the IMF for our rescue is always a constant feature of the budget, how could it read differently than what the IMF wishes it to be?

Even after this budget, the common man’s life will remain the same: earning, spending, and longing for more. The sun will beat down on the dusty streets, and people will face a sense of resignation, worn out from daily struggles, knowing that all their money will be squeezed out from them through taxes and head into the coffers of the IMF.

Just looking at some facts woven into this latest budget document reveals the whole story. Pakistan has consented to increase tax revenues by Rs11,000 billion to meet IMF conditions. Additionally, utility costs will be increased by raising taxes on gas and electricity, which will add tension for the common man.

Furthermore, development spending has been reduced, implying that pro-people indicators and sectors will remain neglected.

Budget speeches usually play with tricky figures but end up as mere formalities without any alignment to ground realities, creating the same fiscal hitches, downturns, and difficulties for the common man. This one is no different, as the grand promises played out as expected.

Most of the figures are overly optimistic and fail to address issues that concern the common man. A bird’s eye view of the document also reveals that it follows the arc of previous budgets, emphasising the same non-delivering sectors without envisioning a departure from the conventional wisdom found in typical Pakistani budgets.

Just one figure reveals the whole story. The proposed GDP rate of 3.6% indicates slow economic expansion, insufficient job creation, inadequate increase in per capita income, and zero improvement in living standards.

Furthermore, there is a sharp collision between revenue and expenditure. The revenue generation for FY 2024-25 is expected to be around Rs7.2 trillion, while the expenditure is estimated to be around Rs9.2 trillion, resulting in a deficit of Rs1.8 trillion. This means that the growth side of the economy will suffer from another bout of stagnation with no major investments, and the government will remain immersed in making up for this deficit.

Much of what will transpire after the budget will be the same old story, with the government borrowing from different sources to plug the deficit, levying more taxes, and burdening the people.

A fiscal deficit of 4% implies that the government will increase borrowing, eventually leading to a colossal public debt. This increased borrowing spree is likely to stir new inflationary trends, pushing more people into poverty. Furthermore, the government is less likely to attend to essential sectors like healthcare and education, caught in the storm of managing this public debt.

A budget that fails to prioritise the health and education of its citizens is sure to backfire, as it will hardly make any difference to the life of a common man.

For instance, as a general observation on education and health, Pakistan’s spending has been 2.5% and 2.2% respectively, and this budget does not propose much change. Pakistan plans to spend an average of Rs109 and Rs38 on education and healthcare per person. Will this not compound problems for poor households and the middle class?

Based on this debt-driven approach, Pakistan’s credit rating is going to suffer major shocks, putting it in a vulnerable position again in the international market.

Additionally, the ambitious figures on tax collection, with an expected increase of about 40% totaling around Rs13 trillion, seek to end tax exemptions on agricultural products and increase regulatory duties on imports. This will ultimately lead to higher food prices in the long run.

Some sectors have been left untaxed, such as small businesses with an annual turnover of Rs50 million. Low-income individuals, healthcare sectors excluding private hospitals, and public transportation excluding luxury vehicles have also been left untaxed. However, is this enough considering that the proposed indirect taxation through GST and ISD will still affect the lives of the people in one way or another?

Instead, the budget could have levied more taxes on imported high-end goods, the tobacco industry, and e-commerce to reduce the burden on the people.

Some may argue that the ultimate purpose of the budget is to stabilise economic growth, which would benefit the common man. However, this argument loses its logical weight when it is realised that increased taxation and the lure of austerity will further burden the same common man.

Another school of thought may assert that without an IMF loan, instilling stability in a crashing economic system may be impossible. However, it is now an established economic principle worldwide that the IMF-driven ‘one-size-fits-all’ approach is highly precarious. Its insistence on fiscal discipline and market liberalisation has seriously disrupted Pakistan’s economy in the past as well.

An American politician once said, “The budget is not just a financial document; it’s a reflection of our values and priorities.”

Unfortunately, our values in this budget remain misplaced once again.

The writer is a freelance columnist