The budgeting process took a major step forward on Friday as the Annual Plan Coordination Committee approved a Rs 2.5 trillion development plan, including a federal Public Sector Public Sector Development Plan of Rs 950 billion. The PDSP was originally pitched at Rs 700 billion, but it was enhanced on the instructions of the Prime Minister, probably in view of the budget being an election budget, and the budgetary burden of the usual election munificence coming in the form of development spending.
The federal budget overall aims at being export-boosting and orientated towards youth welfare. However, there is a narrow limit to how far the budget can help boost exports in an international environment afflicted by falling demand. There may have been good news for the consumer in the fall in the price of petroleum, but that also reflects a worldwide fall in demand, and thus for Pakistan’s imports. The APCC also approved a growth target of 3.5 percent, which is about half the rate the country should be growing at. With an inflation target of 21 percent, the APCC was apparently looking ahead to another year of stagflation. In short, the economy is not in the shape for the government to move forward into an election.
Hoping against hope, the government has also apparently not given up on reviving the moribund IMF programme, with Minister of State for Finance Dr Ayesha Ghaus Pasha saying that the government did not have a Plan B for a refusal by the IMF. As a sort of token of good faith, the government has shared the details of the budget with it. It should not be forgotten that virtually the first thing the IMF will do is make the government cut development spending. The IMF wants a doubling of the commitments from bilateral donors, from $3 billion to $6 billion. This must be in view of the fact that Pakistan has got to find $34 billion for debt servicing in the coming financial year. The government must remember that virtually all it can do to avoid growth falling even further will be to defend development spending. It can contribute to political stability, but so far, that is not something on which it has achieved much.
