It almost seemed as if the decline in inflation, and thus in interest rates, and thus in the government’s own debt servicing costs, dominated the thinking of Finance Minister Muhammad Aurangzeb as he first prepared and presented the Federal Budget for 2025-2026, but also during the traditional post-budget press conference. Mr Aurangzeb proved that he was no politician by the political spin he tried to place on the lower government spending in the fiscal year now coming to end. He said that this was in response to the salaried class asking why the government did not bring its expenditures under control. This was rather disingenuous, for the government had very little to do with the lowering of debt servicing costs, which meant that the government had to spend less to service its debt. It is not as if there was much choice involved. And now that monetary policy has been prised out of the government’s hands by the IMF through increased State Bank of Pakistan autonomy, the government’s traditional means of financing its deficits, by suddenly printing a whole load of new money, has been taken away. The government’s levers over inflation remain, but they are more subtle, slower, and thus less satisfying.
The attempt to posture politically on what was after all an inevitability was probably not much of a success. Could not the belief afforded in the rates applicable to salaried individuals be partly ascribed to this saving? Would this factor have been weighty in helping the government convince the IMF that there should be some relief accorded to the salaried class. Not enough was heard at the press conference about the Artificial Intelligence-driven analytical tools now at the disposal of the CBR, which Mr Aurangzeb said in his Budget speech on Tuesday had already helped raise considerable revenue. So much information has to be provided already, and all the taxman lacked was the number-crunching tools that would do that job. Those tools have now arrived, and the FBR is entering the 21st century.
Though Mr Auranzeb’s press conference was marred by a press boycott, it still left a number of questions unanswered. Is this to be the fiscal year when the effects of reform become visible, and it is possible to predict with confidence that the country will not have to go, cap in hand, to the IMF, for another handout, after the current programme is over.
