Lack of austerity and fiscal discipline threaten greater future financial woes
Finance Ministry figures for the first half of fiscal year 2016-17 represent a weary continuation of the familiar, dismal government performance on the economic front. The negative statistics somehow keep on multiplying and piling up, despite the denial efforts of the official spin doctors. In the latest data, the sign of alarm lies in the budgetary deficit, which has reached a reported 4 year high of 2.4 percent of the GDP or Rs 799 billion during July-December 2016. The target approved by Parliament was 1.8 percent or Rs 600 billion. The danger with this figure is that it tends to have a ‘force multiplier’ effect on the whole economy, apart from reflecting a failure on many fronts.
First, despite oft- repeated assurances to broaden the tax base, there has been no much needed quantum leap in the number of tax payers, which reportedly shrank in the last fiscal year. The true genius of the economic planners seemingly lies only in wealth-whitening amnesty schemes which actually defeat the purpose, or in extending the last date of income tax returns, year after year, as to make a joke of the serious business of revenue collection. FBR’s revenues increased by only Rs 79 billion to about Rs 1.6 trillion, whereas the total expenditure during this half-yearly period jumped by Rs 270 billion to Rs. 2.8 trillion. Missing the approved annual deficit target of 3.8 percent or Rs 1.276 billion is not without consequences. It would mean more frenzied government borrowing, both domestic and foreign, of short term loans at a relatively high rate of interest, further raising the mountain of national debt. Essential development spending will also take a hit.
It appears that with the ending the watchdog IMF programme in December 2016, the government has swept all financial caution down the drain. The IMF insistence on continuing with its economic reforms has also been completely ignored, especially in the energy sector, as the circular debt now stands at Rs 330 billion, with total receivables of Rs 725 billion. Who will foot the bill?