The PML-N government at the Centre, during the first two years of its current tenure, has not lived up to the expectations that were initially attached to it in the management of the economy. The Pakistan Economic Survey (2014-15) and the budget for 2015-16 presented by Finance Minister Ishaq Dar reflect the lacklustre performance of the Federal Government. It is true that the previous PPP government left the economy in a shambles thanks to rampant corruption and gross incompetence. Still the nation expected much better than what the Federal government has to show so far in terms of its achievements in the economic sector. While the economy was in need of radical reforms and decisive action, the nation has been fed with palliatives combined with vacillation in dealing with the major economic issues. Unfortunately, the proposed budget for 2015-16 promises more of the same, thus, belying the hopes for a breakthrough in overcoming the serious economic problems confronting the country or improving the economic fundamentals.

A few facts and figures from the Pakistan Economic Survey (2014-15) would help in bringing home these points. When the PML-N government assumed the reins of power, the GDP had recorded the growth rate of 3.7% during the year 2012-13. After two years, all that the Federal government can show to the nation is the GDP growth rate of 4.2% during the year 2014-15 against the target of 5.1%, hardly something to be proud of especially when we see the next door Indian economy growing at the rate of 7.5%. Economic fundamentals remain in a totally unsatisfactory state of affairs. The national investment to GDP ratio, which is the main determinant of the GDP growth rate, continues to hover around 15% as was the case in 2012-13 when the PML-N government took over. Equally disturbing is the low rate of national saving which was estimated to be just 14.5% of the GDP in 2014-15. To give some idea of our dismal state of affairs, India’s national saving rate is reported to be well above 30% of GDP.

As any economist worth his salt would tell the present government if it cares to know, a low national saving rate would translate into higher balance of trade deficits and increased reliance on foreign loans and capital if the government tries to raise the national investment rate. Considering that we are already running high levels of balance of trade deficits ($16.6 billion in 2013-14), the country can ill afford to go down this path. So it is mandatory for us as a nation to raise our national saving rate rapidly if we want to raise our national investment rate significantly and thereby accelerate the GDP growth rate to 7% or above as the government’s mid-term projections aim at for the year 2017-18. There is no indication in the budget for 2015-16 or the government’s mid-term plans that the Finance Minister and his advisers, who are mostly accountants rather than economists, have any understanding of the critical importance of raising rapidly the national saving rate to the high level of 30% or more as a percentage of GDP if we want to increase the GDP growth rate to the desired level without getting into a debt trap.

Considering the proclivity of the PML-N government and its leaders to conspicuous consumption both in public and private lives, it is highly doubtful that they would go for a programme of austerity and simple living which a high level of national saving rate calls for. Further, unlike the performance of the PML-N government in its first tenure in the Centre in early 1990’s when it carried out a programme of far reaching economic reforms, there are no signs of the adoption of an ambitious programme of economic reforms by the present federal government. It is doubtful, therefore, that the present PML-N government would succeed in achieving the GDP growth rate target of 7% by the year 2017-18 unless Prime Minister Nawaz Sharif gets rid of sycophants and gathers around him a team of well-qualified and energetic professionals to help him in ridding the economy of sloth, incompetence and sleaze in which it is currently mired.

Another disturbing feature of our economy is the low level of expenditure on education and health. According to the Pakistan Economic Survey (2014-15), our national expenditure on education was only 2.1% of GDP in 2013-14 as against the UNESCO recommended target of 4% of GDP. Despite the self-serving statements by the government ministers and functionaries, there is no indication that the situation is likely to change for the better in the near future. A nation, which neglects the education sector in the modern knowledge-based world, cannot hope to compete successfully in the race of nations for progress and prosperity. The condition of the health sector, which claimed only 0.4% of the GDP in the period of July-March, 2014-15, is even more woeful. These figures present the prospect of a nation of illiterates and semi-literates suffering from diseases and ill health struggling for survival and progress in this tough competitive world—-hardly the harbinger of a bright future.

Unfortunately, the proposed budget for the year 2015-16 does not offer any hope of a breakthrough in accelerating significantly the GDP growth rate, which is targeted to be only 5.5%, or overcoming the serious economic problems of the energy crisis, a high level of balance of trade deficit, the high rates of fiscal deficit and unemployment, and the critical conditions of the education and health sectors. To begin with, the government finances will continue to suffer from a severe fiscal imbalance. Against the net revenue receipts of the federal government amounting to Rs.2,463 billion, its total current expenditure would be about Rs.3,482 billion leading to a shortfall of Rs.1,011 billion. Out of the total current expenditure, debt servicing (Rs.1,596 billion) and defence (Rs.955 billion including Rs.781 billion for defence services and Rs.174 billion for military pensions) alone would claim a total amount of Rs.2,551 billion, exceeding the net revenues of the federal government by Rs.88 billion! If one takes into account the development expenditure (Rs.969 billion), the total expenditure of the federal government (Rs.4,451 billion) would exceed its net revenues by the huge amount of Rs.1,988 billion! This massive shortfall would have to be met through internal borrowing (Rs.606 billion), external loans (Rs.751 billion), bank borrowings (Rs.282 billion) and other means. As a result of the shortfall of resources, the fiscal deficit would remain at the high level of 4.3% of GDP in 2015-16 as against the likely figure of 5.0% for 2014-15.

The tax-to-GDP ratio is expected to remain around 11-12% during the coming fiscal year as against the average figure of 15% in developing countries and over 30% in developed countries, indicating the government’s inability to widen the tax net and the widespread incidence of tax evasion. The announced budgetary proposals are also silent on any measures to raise the national saving rate which would, therefore, remain at the low figure of about 15% of GDP. This will severely handicap the government’s efforts to raise the investment-to-GDP ratio and accelerate the GDP growth rate. Therefore, as in the current fiscal year, the target of GDP growth rate is likely to be missed again in 2015-16. The education and health sectors will continue to be the victims of the government neglect despite its tall claims. On the whole, the announced budget is an unimaginative exercise in more of the same which will lead to predictable disappointing results.