Dawn Editorial 29 August 2019

Fiscal blowout

THE numbers are screaming to be heard by now.

All last fiscal year, the government careened from one policy priority to another like a child in a dodgem car while then finance minister Asad Umar talked one day about an inherited crisis, the next day about industrial revival packages, and the third day about borrowing from friendly countries.

All the while the fiscal deficit grew rapidly, and the data from the latest quarter that has just been released, covering the period April to June 2019 — which completes the full year’s picture — shows that the growth in the government’s expenditures accelerated throughout and revenue growth stagnated.

Not only that, in rupee terms, the FBR actually collected slightly less revenue in FY2019 than in the previous year, despite a raft of regulatory duties, two mini budgets, and a massive devaluation which usually boosts recoveries under custom duties.

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But none of that helped, and perhaps for the first time ever, we had slower revenue collection in rupee terms than in the preceding year.

This is nothing short of a blowout.

One might have to travel more than four decades back in time to find another year in which the fiscal deficit — the gap between revenues and expenditures of the federal government — was larger than 8.9pc of GDP, which is where it landed by end of FY2019.

The brunt of the curtailment in expenditures during this year was borne by development spending, which is one big reason why economic growth ground to a near halt as well.

And the major portion of the budget deficit increase came in the fourth quarter.

Where the total deficit came in at Rs3.445 trillion, almost Rs1.5tr of that was accumulated in the last quarter.

This shows the massive pressure that had built up in the economy throughout the year was released in one go towards the end of the fiscal year.

All through the year the government reminded us incessantly of the difficult economic situation it had inherited, often describing it in apocalyptic terms, such as the “worst economic crisis in history”.

But at the end of the fiscal year, the blame for the dismal outturn lies in one place only: with the government in power.

There was a lack of focus on economic priorities throughout, repeated entreaties for more time, repeated reminders that tough choices lie ahead followed by repeated U-turns on whether or not to approach the IMF, and even rhetoric of some sort of revival underway from February onwards.

All that now lies in ruins.

The record setting fiscal deficit is the cost of losing focus on the economy.

It results in higher borrowing, higher debt service costs, and further crowding out of the private sector from the country’s debt markets.

In short, it has cascading consequences that can take years to pay off.

The rhetoric must now end

Airspace closure

INDIA’S brutality in held Kashmir needs a firm response from Pakistan, one that helps highlight the Kashmiri cause around the world. By all means, this country needs to continue its moral, political and diplomatic support to the Kashmiris, especially in this dark hour when the people of the occupied region have been strangulated by Delhi, their fundamental rights trampled underfoot. However, the response to India’s provocations must be mature and calculated; emotionalism must be eschewed in favour of effective diplomacy. Yet some of the suggestions coming from the government may add to Pakistan’s isolation instead of holding India to account before the world. On Tuesday, Federal Minister for Science and Technology Fawad Chaudhry said the government was considering banning the use of Pakistani airspace for flights from India. In the aftermath of the Pulwama episode earlier this year, both countries closed their airspace, which threw the schedules of many global airlines out of gear. According to the federal aviation minister, the closure cost Pakistan over Rs8bn, though India suffered a larger loss.

The proposed airspace ban is similar to other actions already taken in this country, such as the severing of rail and bus links with India. There has also been a proposal floated in official circles to ban the import of Indian medicine and raw material. These moves, rather than censuring Delhi for its belligerence in Kashmir, will only cause suffering to ordinary people in the subcontinent. There are many divided families who will be unable to meet because of these restrictions, while a fresh airspace closure will irk international airlines using routes that cross over both India and Pakistan. Moreover, India will definitely institute reciprocal closure of its own for Pakistani aircraft. Also, can Pakistan afford the considerable losses it will suffer due to the closure? The sensible thing at this point in time is not to overreact and instead handle the situation with foresight. While a strong message must be sent to the Indian establishment that crushing the Kashmiris is definitely not acceptable, people-to-people contacts should not be severed. The window for peace must not be shut from Pakistan’s side, even while emphasising a just solution to the Kashmir crisis that is acceptable to the people of the occupied region. The hateful bigots that form the ideological backbone of the current government in Delhi would want nothing more than permanent conflict in the subcontinent. Pakistan must resist falling into this trap.

A royal mess

POLITICS is a dirty business. It is an oft-repeated cliché, but recent events in Karachi only confirm it. The monsoon rains that lashed the city in the previous weeks caused large-scale flooding and tragic loss of life and property. Even now, days later, some areas continue to be submerged in overflowing sewage water as a consequence of the heavy rainfall. Understandably, this failure of governance has created much resentment, with the public laying the blame at the door of the multitude of stakeholders in charge of the city, particularly the provincial government which presides over the Sindh Solid Waste Management Board, and the various municipal bodies. Besides the shoddy construction and design of roads, the poor maintenance of Karachi’s various drainage sites was a major cause for the flooding. These natural and man-made storm drains are choked due to overflowing garbage and the informal settlements that have gradually come up on them over the years as authorities turned a blind eye or abetted land grabbing and illegal construction thereon.

Following the outcry, the various ‘owners’ of the megacity lost no time before they began chastising one another in public. To highlight the PPP government’s failure, the PTI launched the Clean Karachi drive with the MQM, its coalition partner at the centre. In response, the PPP launched the Blue Jacket movement and criticised the PTI for creating an even bigger mess by not transporting the garbage to designated landfill sites, leading to a stench in the city and an infestation of flies. But perhaps the most peculiar exchange occurred between the former and current mayors of Karachi. PSP head Mustafa Kamal said he could clean the city in a matter of three months. In an unorthodox move, MQM-P’s Wasim Akhtar designated him Project Director Garbage, “on voluntary basis” — only to retract his statement less than 24 hours later, when Mr Kamal issued some harsh statements against him. In the midst of all this petty politicking, the city’s problems pile on. What a waste.