Pakistan faces hard choices to get the economy running

Journalists are also no strangers to political parties celebrating when their opponents make mistakes.

By Shahab Jafry

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Published: Wed 12 Jun 2019, 9:00 PM

Last updated: Wed 12 Jun 2019, 11:07 PM

Despite having covered a few budgets in my time there are some things that I just can't understand. For example, why keep targets that will never be met? Not once - I can vouch for the last couple of decades at least - have we ever met growth, revenue, deficit, even income and poverty goals.
Sometimes the finance ministry floats revised estimates somewhere in or close to the last quarter, but even they are never achieved. So, who was surprised that this time too headlines roared about missing 'all key economic targets' one day before the new budget?
Some interesting numbers are growth rate at 3.3 per cent against targetted 6.3 per cent, industrial sector growth 1.4 per cent against 7.6 per cent and, here's the best one, large scale manufacturing negative 2 per cent against 8.1 per cent, just to give you an idea. 
You can agree with the government that it's all the previous administration's fault for setting ridiculous targets in an election year. But that's pretty much the trend. PML-N achieved modest growth in its five years, yet always remained shy of its own expectations; even had to revise key quarterly indicators downward with the IMF throughout the last program. And it's not like the PTI's estimates are any more believable.
I've learnt, personally, that there are two types of numbers in the annual budget of a country like Pakistan. One that mean nothing, like growth deficit and all that, because nobody can really do anything if they don't quite match in the end. Tough luck, learn a lesson, move on!
And the other that mean a lot, like taxes, duties and surcharges because no matter what happens to the economy or country, the government will extract them. Sure, tax targets are never met and Pakistan's collection rate is among the lowest in the world, but that's small comfort to the middle and lower income groups that do not have the muscle and connections to avoid income tax.
And the more governments slap indirect taxes, because the highest income groups do have the power and patronage to not pay, the more they squeeze life out of weaker earners that just must cough it up.
See that in the recent context of low growth, diminishing wages and increasing prices and unemployment, not to mention round-the-corner IMF austerity, and you can imagine how the average, honest working-class Joe must feel the day after the budget.
Let's not forget that we're also talking about the largest voting public here; smart, mostly educated, men and women who bring new governments to power so they can right some wrongs of old ones. So, who should they lean towards next if Imran, too, repeats the cycle of missed targets and raised taxes because Nawaz left him a broken economy? His own targets, presented in his government's first budget session on Tuesday, appear even more ambitious. So little, if anything, has changed at the start.
Journalists are also no strangers to political parties celebrating when their opponents make mistakes, even if political correctness forces straight faces in public. But there's something unfair about hugs and high-fives breaking out in the opposition camp when an incumbent blunders with the economy. 'That'll kill the people, that'll be great for us'!
That's why some Democrats in the US would have breathed a sigh of relief when the mad tariff regime started affecting their own economy and the dollar. Some anxiety, perhaps some pressure on jobs, would be good headwind for the campaign? Or why Labour in the UK can't really be too unhappy about how the Tories bungled Brexit. Public trauma won't bite the queen but guess who'll milk it in the long run?
Sometimes it doesn't work out too well, as we saw in India, but that doesn't really mean anything. Congress is still wondering what was wrong about highlighting failures on the economic front. You can bet that highest unemployment in 45 years didn't hurt them as much as the public.
And that's why the opposition in Pakistan has been literally salivating at the prospect of the government harming itself with a harsh budget for days now. A senior PML-N leader told me just before the budget, provided I don't divulge his name, that the government had no choice but to shoot itself in the foot.
"What are they going to do?" he asked. "They are forced to cut subsidies and choke everybody with taxes or there'll be no IMF, and if there's no IMF there's just default."
Then he topped it off with, "We're lucky that this government handled the economy so poorly, basically scored an own goal and hurt so many people, and now there'll be worse news with the budget." He even said that the intense heat, lubricated by high electricity prices, would make people more miserable and help the opposition's cause. Just stopped short of saying 'lucky we didn't win the election, really, given the situation'.
From the looks of things, then, people will spend this electoral cycle tightening their belts more than anything else. That, as we have seen, means more talking points for politicians. Voters, meantime, will remember how the last time the economy was far stronger and life much better was when they didn't vote anybody in at all, and a dictator ran the show. But at least they finally have a functioning democracy.
Shahab Jafry is a senior journalist based in Lahore

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