Fiscal deficit blowout | Pakistan Today

Fiscal deficit blowout

  • A fresh crisis for the government

The balance of payments crisis is hardly over as the Finance Ministry’s quarterly report on fiscal operations showed that there was a deficit blowout caused by the failure of the government to control its expenditures, or to increase revenues. Unusually, tax revenue was lower than the previous year’s, which means that the taxpayer has reached the end of his tether, or corruption continues as before. The latter would negate one of the basic assumptions of the PTI, that people who had been evading taxes because they did not trust the government, would begin to shell out once a trustworthy person, Imran Khan, headed the government. The decline in both imports and exports, as well as foreign direct investment, as revealed by the latest State Bank figures, indicates that the economy is heading into a recession. The Finance Ministry reported that the third quarter had seen both debt servicing and defence expenditures rise to new records. Debt servicing has been swollen by the devaluations of the rupee, while defence spending has been hiked after the threat of war with India early in the year.

The tax amnesty launched recently by the government thus falls into place, as the government overcame its own earlier rhetoric (about amnesties benefiting only the corrupt), as an attempt to raise revenue. This also seems to be the motive behind FBR Chairman Shabbar Zaidi’s announcement of what seems a sales-tax amnesty for manufacturers.

The agreement with the IMF has failed to put the government back in control. In fact, the IMF’s latest report in its Fiscal Monitor, Curbing Corruption, predicts that Pakistan will face increasing deficits in the years to come. It thus become incumbent upon Prime Minister Imran Khan to explain to the nation how he intends to bring the country out of its current crisis. The best thing would be for him to make a statement in Parliament, where it could then be discussed by the members, but if he persists in staying away because he wishes no truck with the opposition, he can at least make a broadcast to the nation. The nation has a right to know his policy for dealing with the crises afflicting it, assuming there is a policy, which does not seem evident at the moment.