Not quite a corona budget | Pakistan Today

Not quite a corona budget

  • Did the pandemic change anything?


It was one of the paradoxes of the 2020-2021 Budget that the man responsible for it, PM’s Finance Adviser Dr Hafeez Sheikh, did not seem to believe the revenue collection figure of Rs 4.91 trillion would be met. At the traditional post-Budget press conference, he said the provinces were free to decide whether or not to follow the revenue collection figure in their own Budgets, depending on how much they adjusted for previous collection history. What he left implied was that the collection history of the FBR should determine how much the federal government was to expect from the Federal Board of Revenue.

That threw into sharp relief the fact that the provinces depend on the ability of the centre to collect taxes for their own financing. The federal divisible pool is allocated to the various governments according to the National Finance Commission Award currently in force, but the actual money paid to the provinces, which is done every month, depends on how much the FBR has actually collected. The doubt Dr Sheikh expressed is justified, for the FBR collects less than it promises. Interestingly, the IMF bases its own calculations on this figure, in making its recommendations for the Budget.

In the financial year just ending, the FBR was unable to achieve its original target of Rs 5.5 trillion, while the covid-19 pandemic had worsened the position. Even before it had started it, the target had had to be revised downwards. This had an unfortunate effect on provincial finances, which found themselves squeezed at the very time they were coming under increasing pressure from the pandemic, as they were the ones that had to find the resources to fund the front lines of the fight against covid-19. At the same time, the provincial governments found that they were paying for the ‘cleverness’ of the past, which had found its expression in not filling vacancies of medical and paramedical staff. That the staff which had been employed had a number of service-related grievances is another matter, but this too was, and still is, a hurdle for the provincial governments.

  • The PTI was elected as a harbinger of change, but its budgets have not shown any commitment to its core tenet, that corruption was preventing economic progress. Perhaps it could be argued that the veconomy had suffered a major blow because of the pandemic, but that should have meant renewed efforts against corruption. However, that was not to be seen in the 2020-2021 Budget

However, it was also noticeable that the Budget did not include any new-found emphasis on health. This was not entirely because health is a provincial subject, and the major thrust on health would come in the provincial budgets. The federal government is responsible for quarantine administration (which is a concomitant of its responsibility to regulate foreign relations and thus all ports), as well as for transmission of funds obtained from abroad (provinces are not allowed to obtain aid directly from abroad, though the projects that are planned can be executed at the provincial level). These are thus areas that should have been reflected in the federal Budget.

Another area of interest is the defence budget. Under normal circumstances, there would be nothing exceptional about the defence budget, and the increase of Rs 60 billion over the revised estimates would be a virtual freeze. But as the original budget was Rs 1.15 trillion, and the budget this year was Rs 1.29 trillion, it was relatively clear that the defence budget would be increased if the need was felt.

Whether or not the need is felt would depend on India. India’s budget, announced in February, came before covid-19 had been formally declared a pandemic, and before any lockdown had been announced for India. It included INR 3.375 trillion for defence. Like Pakistan, India has held back on funds for healthcare and education to spend on its armed forces.

From one point of view, it would seem that despite the covid-19 pandemic, there are serious security threats to Pakistan. India has also recently had a confrontation with China in Ladakh, followed by a second. While China does not face as emotive a dispute with India as Pakistan does over Kashmir, none the less, its border problems started by the demarcation of the boundary between India and China long before Partition in 1947, and even before the fall of the Chinese Empire in in 1911.

The Indo-Chinese confrontation occurred at a place where Pakistan was bound to be interested. Pakistan has also had direct confrontations along the Line of Control in Kashmir in the shape of artillery duels. The Pakistan government cannot rule out the possibility of getting involved in a Sino-Indian conflict.

Such a conflict would see Pakistan finding itself pitted against the USA, which would prefer to take the side of the country it has been allying itself to even more closely for a long time. As it has been building India up to act as a counterweight to China, it would have to back it. Pakistan would have to choose at that point between Chinese and US friendship. The other parties involved are so large, that Pakistan will not be able to play a mediatory role. One side is bound to see even the attempt as an example of Pakistan pussyfooting to avoid choosing sides.

Is the tension not balanced out by the pandemic? The basic problem is one of trusting the rationality of the other. A war at this point should be unthinkable. Unfortunately, the Indian leadership has not shown much rationality recently. Also, not only has Donald Trump done things which have made some question his rationality, but he has shown Indians that he can ignore their own acts of irrationality, such as when he paid no attention to the anti-Muslim riots occurring in New Delhi while he was visiting it. That the BJP saw fit to allow that riot to proceed showed how visceral is its dislike of Muslims, and thus of Pakistan. Modi also learned from his election victory in 2019 that war scares against Pakistan win votes.

Another destabilising factor may be the nature of the Pakistani regime. In both 1965 and 1971, there was a military regime in Pakistan. While the current government is civilian, the military has a significant say in matters of foreign policy, especially India. Under those circumstances, the possibility of a conflict exists. However, it should not be thought that the Pakistani military is particularly bellicose. Any conflict would be imposed by the needs of the BJP.

Trump is the unpredictable factor. He is made even more unpredictable by the fact that he faces an election in November, and not only has to deal with the covid-19 pandemic, but has got a major bout of race riots on his hands. A war might actually help his re-election prospects, as the American public tends to rally around the incumbent when there is a conflict. The only thing to hold him back might be the fact that incumbents were harmed by the Vietnam War.

The PTI was elected as a harbinger of change, but its budgets have not shown any commitment to its core tenet, that corruption was preventing economic progress. Perhaps it could be argued that the veconomy had suffered a major blow because of the pandemic, but that should have meant renewed efforts against corruption. However, that was not to be seen in the 2020-2021 Budget.