- Still fiscally insecure
Wasn’t it the State Bank governor who said just the other day that the country had come out of the economic crisis it had been facing since before the PTI government took over? Surely reading Thursday morning’s papers would have been a somewhat sobering experience for the SBP chief. Fiscal operations data released by the ministry of finance confirms that the deficit, which was the number-one problem since failure to control it would certainly mean financial default, has now jumped to an eight year high despite repeated assurances from the government that things had, finally, turned around. Almost all major expenditure and revenue indicators, the finance ministry now accepts, have registered marked deterioration in the first half of the ongoing fiscal compared to the same period last year.
No surprises for guessing that the biggest drag on the exchequer remains the double whammy of debt servicing and defence spending. The import bill is a little more sanitised this time but that owes more to falling Brent crude prices internationally than any measures the government might have undertaken. Besides, exports have hardly budged despite taking the life out of the rupee over the last year or so. Add to that that practically zero revenue generation measures were announced in the still un-debated Finance Bill, only more tax breaks, and it’s fair to say that there is little chance of the deficit shrinking significantly during the rest of the fiscal.
And that, of course, leaves room only for every government’s favourite policy when it comes to running the country – printing and borrowing more money. One problem that PTI will face in this regard, which PML-N did not to such a degree, is rising inflation on top of prices that are already at a five-year-plus high. Perhaps now the finance minister will understand the contradictory nature of his last budget. Posturing towards expansion when both monetary and fiscal policies are text-book contractionary, with a Fund program just around the corner, is not turning out to be the smartest idea after all. Sadly, the biggest price for this incompetence is paid by the working classes who are treated to very different promises during the campaign trail.