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Come Hell Or High Water: Spending Priorities Remain Intact In Covid-19

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A glance at the budget every year tells us most of what we need to know about the nature of the Pakistani polity. The largest chunks of spending go towards debt servicing and defence expenditure. All other considerations follow after these. In that sense, the Pakistani polity appears as a severely debt-ridden national-security state.

The problems with this are twofold.

First, the structural features which keep Pakistan mired in unsustainable levels of debt. These have remained unchanged for years. The country remains handicapped by the need to pay creditors and is forced to adopt growth-dampening economic policies imposed by international financial institutions as the necessary price of keeping it afloat. Revenue collection through taxation of economic elites has remained an elusive goal. Yet, spending priorities often appear to be unaffected by this reality – including the investments in infrastructure projects which often appear to be only loosely linked to any seriously considered overall plan for generating economic growth.

Second, the idea that since the country is in a “tough neighbourhood”, it must combine the above fundamentally unsustainable model of managing the economy with defence spending that matches its strategic requirements and ambitions. There is a cost to be paid for Pakistan punching above its weight in strategic power projection. That cost is mostly incurred by the country’s exchequer and, in the final analysis, represents lost opportunities for growth-inducing investments and/or social spending. Not to be outdone this year, defence spending has risen by 11.9%.

These two aspects then combine with the lack of any institutionalized policy-making and the current government’s dramatic shifts and populist U-turns on its own fiscal and economic strategy. All these factors come together to form a straitjacket on Pakistan’s economic prospects.

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Much of the government’s emphasis appears to be in proving that a 2% growth-rate is possible in the upcoming fiscal year. How realistic is this target in a highly unpredictable global and local environment thanks to the Coronavirus pandemic? There is little indication from the authorities on that count.

While overall spending on health and education has indeed risen, that must be considered in view of the brutal slashes which were pushed through in a crisis situation last year.

Non-development spending takes the lion’s share and revenue generation targets continue to elude the government.

Advisor to Prime Minister Imran Khan on Finance and Revenue Dr. Abdul Hafeez Shaikh has been quoted as saying that shortfalls in the FBR revenue will be compensated for by gains through non-revenue measures: namely profits of the State Bank of Pakistan, petroleum development levy, privatisation of at least 3 state-owned enterprises and further expenditure cuts. The latter three measures are likely to further hurt the country’s working masses in their own ways – and they are all because the government, for all its bluster, has simply been just as ineffective as previous administrations at improving revenue generation.

Unfortunately, the big questions are rarely ever discussed in Pakistan – with most of the emphasis being on firefighting and staying afloat through crisis after crisis. The most successful examples from Asia have been of states which prioritize economic growth on an institutional level: fueled by a combination of exports and domestic demand, while their key domestic priority is poverty alleviation.

One glance at our budgetary outlays past – present and projected – indicates how far Pakistan’s successive leadership has been from such goals and outcomes.

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