- Very populist, indeed!
Considering this was Asad Omer’s second budget in a few months, he could have reminded everybody a little less about the last government’s economic track record, and the opposition could have played less of a spoiler role. Also, the finance minister was right that this was less a budget and more an exercise in policy reform. Who can argue that incentivising SMEs is the need of the hour? And the tax concessions for the corporate and banking sectors is just the right thing to do to revive market confidence. The stock market sweetener, too, is spot on considering the trauma that has bled the PSX for so long.
But didn’t the speech offer precious little, in fact almost nothing at all, in terms of revenue? And isn’t the government hamstrung as it is just because it has not been able to plug the deficit? Tax collection has gone down. Export earnings, despite beating the rupee to the tune of 30pc over the last year, have only increased by a percentage point or two. Hence the back and forth to friendly countries; just so we can try, at least, to avoid default on our terms.
Things will become clearer, of course, when the detailed finance bill is scrutinised. Yet while the government must be credited for trying to set the direction right for long term growth, it must realise that most of the measures, like promoting ease of doing business, stimulating manufacturing and exports, are rather long term and will involve a time lag. And that brings us back to the question of plugging the immediate revenue gap. Plus these populist measures have come when the ruling party has faced a lot of bad press. The market should now rally for a few days till things become a little more clear. And that will mean that unless the government has a secret, mysterious source of revenue that it’s telling nobody about, it has definitely decided to adopt a formal IMF program. Without that elbow room, such populist measures, appreciated as they are, will only require a U-turn sooner or later.