Finance Minister Ishaq Dar presented his fifth budget of the current tenure with the general anticipation being that it would be an election budget. It wasn’t, at least not in the sense of doling out largesse, which could have come in the form of tax relief, expenditure on public goods, and cash handouts. The mechanism for the last even exists, in the form of the Benazir Income Support Programme, but it was not expanded. There was no election-oriented tax relief, except for a cut in the corporate tax, while there was no unusual development spending.

Perhaps the main reason for this was the Finance Minister’s previous Budgets having failed sufficiently to create the necessary fiscal space which would allow for the kind of generosity of spirit that a true election-year budget demands. However, there was still one figure over which Senator Dar could wax enthusiastic, and he did. That was the growth figure, which at 5.5 percent GDP growth was the highest in a decade. It was still below the sort of growth that the Pakistani economy needs, but it was still an improvement on the previous figures.

Does this reflect a new low-growth trajectory for the Pakistani economy? A high-growth trajectory would require growth to average around 7 percent for a considerable time. Actually, Pakistan has not achieved the sort of growth it needs to move ahead for some time. The Budget is thus supposed to function both in the present, all as in the future: in the present to put the economy on a growth trajectory (or to keep it on one, if it is already there), in the future, because the measures taken now will position the economy to go on a growth trajectory sometime in the future.

The jubilation at a rate which is about five percent means that the previous figure of 7 percent has been silently discarded as undoable. The official silence over the figure has been accompanied by Prime Minister Mian Nawaz Sharif saying as recently as a fortnight before the Budget that Pakistan would become one of the Asian Tigers, that group of East Asian countries that maintained high growth rates, including above the double-digit level, between the 1960s and 1990s. They included Taiwan, Hong Kong, Singapore and South Korea. The first two are essentially Chinese, the third is multi-ethnic, but has a Chinese majority, while the last is ethnically and culturally akin. Though China is not counted as an Asian Tiger, it is no slouch, and has overtaken Japan as the world’s second largest economy. This it has done by maintaining very high rates of growth, in the 10 percent range, over prolonged periods of time. Pakistan seems to be introducing both the Chinese and South Korean elements, with the China-Pakistan Economic Corridor being accompanied by a lower-key South Korean presence. While the CPEC is driven by the Chinese government, South Korean corporations have been at the cutting edge of that country’s engagement with Pakistan. Among the other effects of the CPEC, there will also be an influx of Chinese economic actors, who may bring their high-growth trajectories along with them.

An important component of the CPEC, as well as of the Nawaz government’s economic programme, is electricity. The last general election saw Mian Nawaz’s party, the PML(N), pledge to end the power crisis. One of the components of the CPEC became power projects, presumably because Chinese industrial projects along it had to be fully powered. However, some coal-fired projects were dropped during Mian Nawaz’s visit to the One Belt One Road summit in Beijing, for being uneconomical. One of the coal-fired projects not dropped was the 1320 MW Sahiwal Power Project, whose first 660 MW was added to the grid. It should be noted that that was to be contrasted with the Budget, which seemed to contain no incentives for the power sector. One of the problems not just for Mian Nawaz, but all politicians, is that the election cycle, five years, is too short for power projects, which are of long gestation. The Budget might be a powerful tool, but without a guaranteed power supply, it is pretty much a wing and a prayer. The shortest time for power projects is for thermal projects, which are not only the most expensive, but also heavily polluting. Thermal power plants are supposed to take a backseat now, not just to hydroelectricity, but also to solar power, which is becoming dramatically cheaper while its technologies advance exponentially.

Another problem that was confirmed in this Budget is that Pakistan seems to be running on the need to meet debt servicing and defence. Debt servicing, or rather interest payments, reached Rs 1.363 trillion, while defence reached 920.2 billion. Put together, they consume most of the 2926.1 billion that is the federal share of the new tax target of Rs 4013 billion. It is worth noting that interest payments exceed the development budget of Rs 1.2785 trillion. That means the government is actually paying out more money to service its debts than it is spending on new infrastructure.

One of the great uncertainties about the present Budget is that it is the first in which the IMF is not giving an Extended Financing Facility. That means foreign debts have to be serviced from revenues, and while Pakistan has to pay off its own bat, where previously it had received aid to repay previous aid, it does not face as much interference in its affairs by the IMF as it then did.

The whole concept of government debt must be called into question. Taxes are levied to provide services. The main services provided by the federal government are defence and development. Unfortunately, it doesn’t collect enough taxes to pay for them. So it must borrow. And that means the debt servicing burden. Actually, the borrowing is meant to finance the lifestyles of government officials, both permanent and elected. They are the ones most affected by any government inability to pay.

It must be acknowledged that the debate itself reveals the danger. If the discussion is about the government’s solvency, it means that matters have come to a pretty pass. There has been some sniping at the defence budget, with demands that the money instead be spent on health and education. This does not take into Account the fact that any defence savings would probably go to debt servicing. It is true that increases in defence expenditure were met by borrowing, and the country is now having to repay that borrowing, but should not obscure the problem that the Finance Minister faced. The ‘anti-terror’ allowance on top of the increase in salaries for government servants is being given a political connotation, but it must be seen as overdue, not a reward for not taking over.

However, while government servants and pensioners have been given a raise, it was not an election budget in the sense of a distribution of largesse and a lowering of taxes. That was probably because there was no largesse to distribute. The government’s economic policies have not yet delivered. It will claim in the election campaign due next year that the policies are showing results, and the same hand should be kept on the tiller to get results. If there is no dissolution, and this House runs to term, it should have another Budget presented to it, and though it will have to rush to pass it, that may well be the election budget everyone thought this would be.