Expansionary budget
THE budget for FY24 unveiled by the government yesterday was prepared amid unprecedented domestic and global uncertainties, with the economy representing a classic case of stagflation marked by almost zero per cent growth, rising unemployment and soaring price inflation.
That said, many expected the budget to outline a well-thought-out strategy to steer the country out of its current crisis, and put it on the path of economic stability and debt sustainability.
However, by overlooking certain measures, such as the documentation of the economy and privatising loss-making SOEs, the government has failed to turn a crisis into an opportunity. Finance Minister Ishaq Dar’s budget speech contained not a single word on how the government planned to pull the country out of the current economic morass.
At best, the budget seeks to balance some populist measures, ahead of the next elections, with tough conditions imposed by the IMF for the resumption of the soon-to-end $6.5bn bailout loan programme.
The government wants to secure part of the $2.5bn undisbursed funds, so that the markets can overcome their nervousness about a possible sovereign default. But will it work?
For starters, it is a fiscally irresponsible budget: no effort has been made to curtail the budget deficit. The fiscal plan that the budget has laid out will lead to the accumulation of more debt, even if the targets — tax and non-tax revenue of Rs12.16tr and GDP growth of 3.5pc — are met, despite the odds.
The expansionary nature of the budget targets a massive fiscal deficit of 6.5pc of GDP against the IMF’s programme projection of 4pc for the next year on the back of large development allocations of Rs2.7tr, energy and other subsidies of Rs1.07tr, a 30-35pc increase in government employees’ salaries, and similar expenditure that could have been eliminated or significantly reduced.
That is going to be problematic in Islamabad’s ongoing talks with the IMF. If the lender doesn’t agree on these numbers, the government will soon have to revise its spending targets. Nor does it explain how the government intends to meet the other crucial IMF condition of commitments to cover the financing gap of $6bn.
If the revival of the IMF funding is the only objective, Mr Dar has not been able to give the lender a credible plan either. We are living in challenging times that require a paradigm shift in how we manage our debt-ridden economy. There are no easy fixes.
If the government thinks it can revive the competitiveness of a broken economy and stimulate growth through large but borrowed development stimulus and the distribution of freebies, it is mistaken.
Pakistan needs to make some tough choices to get out of the present crisis. So far the government has shown no inclination of taking those difficult but necessary decisions.
Published in Dawn, June 10th, 2023
Badakhshan bombing
THE gruesome tactic of attacking funerals is part and parcel of the militant playbook. Several funerals have been attacked, mostly in KP, over the past few years during the height of militant activity in the country. Similar scenes of carnage were witnessed when the funeral of the acting governor of the Afghan province of Badakhshan was targeted in Faizabad, the provincial capital, on Thursday. Nisar Ahmad Ahmadi was killed by a suicide bomber on Tuesday in an attack claimed by the self-styled Islamic State group, and mourners who had gathered for his last rites were targeted in a mosque in a second strike. It is widely believed that IS is also responsible for the latter. At least 15 people have been killed in the mosque blast, while several more received injuries. This is not the first time IS militants have attacked senior members of Afghanistan’s ruling Taliban movement. In January, a suicide bombing caused a high number of casualties outside the Afghan foreign ministry in Kabul, while in March the governor of Balkh was assassinated, also in a suicide blast, by IS in Mazar-i-Sharif.
The locations of the aforementioned attacks indicate that IS can strike across Afghanistan. The latest atrocity in Badakhshan occurred in an area which is close to Tajikistan, China and Pakistan. The bombing comes as a reminder that left unchecked, IS has the capability to cause major havoc within Afghanistan, as well as to imperil the security of neighbouring states. That is why the Taliban regime must cooperate with regional countries in counterterrorism efforts. This also means that Kabul’s rulers cannot be selective about the militants they choose to fight. For example, the Taliban cannot go after IS and leave the TTP — their ideological comrades — to carry on with their anti-Pakistan activities. Afghanistan’s counterterrorism efforts must target all militants, and regional states should extend their help to Kabul to neutralise the threat.
Published in Dawn, June 10th, 2023
Politics by proxy
LIKE some grotesque phoenix, the Istehkam-i-Pakistan Party has risen from the still-smouldering ashes of the PTI. Jahangir Khan Tareen — who was once regarded as something of a hero by PTI’s supporters for rounding up and jetting in independents after the 2018 elections to help ensure Imran Khan had the numbers to form a government — on Thursday unveiled his own political party. The presence of familiar faces by the powerful sugar baron’s side would have greatly stung PTI’s supporters. They need not lose much sleep over the betrayal. These electables and independents had once parachuted into their ranks in droves only because the kingmakers wanted to see Mr Khan as prime minister. Now that that romance is over, the parachuters are leaving just as quickly to join the latest king’s party. If Mr Khan really believed he’d come to power on the basis of his own popularity, he should disabuse himself of the notion and reflect on the choices he made in 2018. There will be lessons aplenty for the future. What is left of his party may even rise up stronger from the experience if it can focus on internally strengthening itself; learning from the experiences of the PPP and the PML-N may offer some insights.
The PML-N has made it clear it will be angling for the new party’s support. Mr Tareen enjoys good relations with the N-League leadership, and the two may leverage each other’s strengths in Punjab. However, it is unclear how much the new party will cannibalise the PTI’s vote bank. As someone wryly commented, it is impressive that the IPP has 100 ex-MNAs and MPAs, but it also needs actual workers. Meanwhile, Mr Khan still believes anyone handed a ticket by him will win a free and fair contest. Instead, will the IPP attempt what the TLP accomplished in 2018 — ie, spoil different parties’ vote banks and set the stage for another government that is dependent on the whims of smaller parties and spoilers? The parties invested in this project should seriously reconsider if such an outcome suits the country. Our decision-makers are thinking short term and may be about to make a blunder by introducing fresh variables into the political equation. Pakistan is experiencing one of its worst crisis periods in history. It needs stability. The solution is unadulterated democracy, not continued experimentation.
Published in Dawn, June 10th, 2023