This year’s script
Dar Sahab seems optimistic enough going into budget preparation – even though his recent five-percent-growth boast will clearly not materialise and the GDP will, most likely, settle at four-and-a-half. And he would do well to heed the World Bank’s latest piece of advice if he wants the economy to achieve the donor’s projection of 4.8 percent by the end of the next fiscal. Whatever advances have been made on the macroeconomic front are owed, after all, to exogenous factors; the Rupee stabilised because friends rented our vaults, inflation dipped because oil collapsed, there’s a game-changer because the Chinese thought of CPEC, etc.
Yet there are now developments (also outside our control) that threaten to undermine some of our usual support structures. Remittances, for example, are suddenly under pressure. Since the bulk of them come from the Gulf, where there’s considerable slowdown (as well as limited political rejection of Pakistan), remittances are expected to feel the squeeze sooner rather than later. On the CPEC front, there’s not just Pakistan’s internal political paralysis that is cause for concern, but also the deceleration in the Chinese economy, which could upset the original schedule of payments and grants.
And nothing changes on the home front, of course. Indirect taxation might have helped the kitty somewhat, but conventional taxation has actually gone down. There was no effort to overhaul exports or hunt for new markets; and the EU-plus window took only a year to fizzle out. Also, there’s no likelihood of tax or energy reforms in this cycle – contrary to the World Bank’s thinking. The government is already gearing up for election campaigns, and unpopular steps are already ruled out. And that is precisely why there’s not going to be another IMF program till the election. That means the deficit will eventually rise, the rupee will come under pressure and growth will remain constrained. If Dar Sahab has a different take on the economy, it will become clear as the budget nears.
fiscal policy issues in Indonesia is almost the same as in pakistan .. pengirman funds from the state middle eastern countries into one additional foreign exchange to encourage economic growth in Indonesia … regards ..andi_ Bandung
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