Budget – a ray of hope?

It’s that time of the year again

While criticising the government for its failures to meet the economic growth targets, it is essential to evaluate whether the set targets are even realistic, as failing to hit them over and over again has become a norm.

Hopes of the nation, despite facing setbacks time and again, are once again soaring as the announcement of budget for the year 2017-18 is round the corner. Speculations from financial analysts and economic experts are on a high rise with respect to the provisions expected to be made in the upcoming budget. These optimisms stem from a mix of international reports, and government claims of Pakistan’s economy having finally overcome its inertia and being one of the emerging economies.

With the release of Economic Survey report for the year 2016-17, the government is once again in the line of fire at hands of critics, once again falling short of the designated targets. Seeing the half glass full rather than the other half, the Finance Minister, Ishaq Dar, however, sounded confident while unveiling the economic survey, emphasising on the positives achieved, and declaring the highest growth achieved by Pakistan in the last ten years as a landmark success of the PML-N government.

With the achievement of growth rate of 5.3%, according to the economic survey, a highest in the last decade, Pakistan has now emerged as a $300 Billion economy.

Although the PML-N government has fallen short of hitting the 5.7% growth target for the year passed, it sets its aims on hitting the 6% growth mark in 2017-18, as the growth rate achieved thus far is far better than previous years, and surpasses the forecasts made by the international institutions. 11 out of 20 key growth rate indicators hit the targets set by the government.

An encouraging progress, although short of target, however, remained insufficient to cater the employment needs, and absorb the young talent. Anything below, analysts warn, a growth rate of 7% in coming years will fall prey to this growing beast of unemployment, and will remain short of accommodating the talent emerging from our midst.

Dar, in his talk, also claimed that continuing on the same path, and growth trajectory, Pakistan by 2019 will not be needing any financial assistance from the International Monetary Fund (IMF), and also claimed that Pakistan will be included in the league of G-20, and will surpass the economies of Canada, South Korea, and Italy by the year 2050.

Opportunities & threats

The Economic survey of Pakistan 2016, in addition to jotting down the growth figures, also highlights the potential opportunities to be capitalised on, and threats to be dealt with, and can help in guiding the government while laying down the future course of action.

The ever declared backbone of Pakistan’s economy, agriculture sector, finally made a comeback amid enhanced production of major crops, and growth in forestry, recording an annual growth rate of 3.5% equivalent to the designated target subject to government focusing on the ignored sector employing approximately 37% of the labor force in the country.

The services sector, accounting for more than half of the economy, emerged as a dark horse, constituting approximately 67% of the total growth recorded, surpassing its designated growth target of 5.7%.

Performing exceptionally well, the agricultural and services sectors have emerged as potential contributors to the national economy, and bear the capacity to further enhance their share in the economy.

As opposed to the aforementioned opportunities, the threats highlighted are a serious cause of concern for the economists. The industrial sector, in particular, despite being favored by the government through continuous power supply, tax relaxations, etc., once again failed to meet its set target, closing the year at 5% as opposed to 7.5% growth target. The exports also remained on the back foot, and did not record any improvements. Federal Minister Ahsan Iqbal labeled the latter as being due to lack of focus on value addition sectors. The government missed all its industrial targets for the passing out year.

The infrastructure also remains inappropriate to accommodate the targeted growth, and investments and savings also remained stagnant.

The Missed Targets: Are they even realistic?

Setting targets is as important as meeting them. The emphasis, in case of our governments, seems to be more on persuasion of the targets rather than setting them right.

While criticising the government for its failures to meet the economic growth targets, it is essential to evaluate whether the set targets are even realistic, as failing to hit them over and over again has become a norm.

Budgets present a rosy picture to the masses exhibiting inflated estimates, which are of course, unrealistic. For many years, we list down our expenditures first, then deficit rate dictated by IMF is tallied, and then we set the estimated revenue figure. This procedure does not take our revenue generation capacity in to account. Hence the missed targets.

Needs, Wants & Demands from budget 2017-18

What is expected of this budget is a focus on promising sectors of the economy in order to boost the economic output, in addition to setting the SMART (Specific, Measurable, Attainable, Relevant, & Timely) goals for the economy.

Pakistan till date sustains its position among countries with the lowest Human Development Index (HDI) scores, indicating inadequate social development which in itself stems from lack of appropriation to the relevant sections of the economy such as health and education.

The budget 2017-18 must take into account the pressing Human Development needs of the country in order to ensure that a prosperous human capital.

While figure for revenue is estimated, measures should be taken to ensure that the tax net is broadened to make this budget a success.

The country’s hunger for energy must be satisfied by ensuring that power sector gets back on its feet as soon as technically and financially feasible.

Let this budget truly be the box of hope for the masses.