- Making the right headlines
It is one thing say that the PML-N government has no plans to knock on the Fund’s door ‘before the end of its tenure’ and quite another to claim that the economy does not need foreign aid, and a lot of it. The finance ministry did not contradict recent claims in the press, after all, that they would go begging for $13b, at least, just to pay back loans due next year. That, of course, does not include the money Islamabad is going to need for ‘operational expenses’ as just about everything of the government machinery is run on borrowed money.
And the mysterious $1b loan – so secret that he could not divulge any details, even though the press learnt soon enough that it was from China and repayable in three years – seems like something out of the same closet that Dar pulled the Saudi one billion from a few years ago. Squeesing the odd billion here and there from the new budget is admirable, but not nearly enough to keep the fiscal deficit from exploding. Rs300b by jacking up the petroleum levy, expecting the devaluation to boost exports, hoping remittances will stay stronger, and recent duties on luxury imports is all the government seems to count on.
Miftah did mention, in some detail, just why this particular budget was of such an expansionary nature – even though he tried to rule out election concerns, etc. That, on top of the deficit, underscores the need for urgent measures to support the current account. If the government sidesteps loans in the immediate term, it will likely float more bonds – that too if it survives the FATF scare. But, considering the environment, they are likely to accept even more ridiculous interest rates than last time. The new finance minister should not mislead the public. The government might make the right headlines for the two more months it has left, but the economy will not survive as it is for much longer.
