- The woes of the government ahead
The coronavirus pandemic has wreaked much destruction, not least within the economy, and thus of government finances. Nevertheless, the government must prepare a budget for the coming fiscal of 2029-2021. However, as Pakistan is under an IMF programme, having got a $6 billion package approved last year, its revenue targets, and the consequent taxation proposals, must be approved by the IMF. This year’s performance is dismal, and the impending failure of the Federal Board of Revenue to meet even the post-pandemic target would not be seen as encouraging. From an initial target of Rs 5.5 trillion, the FBR was first set a target of Rs 5.1 trillion, which was scaled down to Rs 4.8 trillion, but as PM’s Finance Adviser Dr Hafeez Sheikh has disclosed in an interview, only Rs 3.9 trillion are expected to be collected, which is 19 percent below target. The reasons for this are collapses in all sources of government tax revenue both direct and indirect. FBR sources have also disclosed that even this collection depends on Eid sales.
The FBR would prefer to have no new tax in the budget, but would prefer to carry out the process of removing any anomalies that might be found. However, this would only be done if the IMF approves, and if it identifies no new sources from where tax revenue might be found. However, there are expected to be huge shortfalls in revenue, and it is not expected that loans, either foreign or domestic, could be raised to meet the huge financing gap that will be created.
Perhaps the relief that the G20 has announced on debt repayments will help, and will reduce the debt servicing requirement, but it is inevitable that all heads of spending will have to be reviewed. There is no way that any government can continue financing the various heads of expenditure, and cuts will have to be made. An additional burden the government will have to bear is that of welfare expenditures like the Ehsaas programme. There is also a crying need to rectify previous misplaced spending priorities, which have led to Pakistan being in a deeper hole than it would have been had it spent more on health, thereby having a healthier population, more providers and more equipment.
