The impression that the Budget is prepared, in accordance to the wishes of the IMF and the World Bank, is too widespread to be dismissed out of hand. It cannot really have enhanced the impression that federal Finance Minister Ishaq Dar, presented an independent budget for the coming fiscal year, 2015-2016, when it was met almost immediately by messages of support from the local country heads of both. Whether or not the rumour is true, is irrelevant, where it is the impression that counts.

One of the reasons for this rumor is that the budget is presented at the time that the IMF decides on the next tranche for Pakistan. The World Bank and IMF gain power over a country, because they put up the money the country needs to sustain. Lending that money gives them the power to demand, that certain policies are to be followed.

Another thing to be remembered is that the President of the World Bank is appointed by the US President. The Managing Director of the IMF is elected by a Board of Directors consisting of the member nations, but because voting is weighted, Europe generally fills the slot. Because the USA has 16.75 percent of the total votes, it is in the running. Thus the IMF and the World Bank ensure that those depending on them follow the USA’s policies and being on an IMF programme is an indication that the USA regards that country with approval.

The USA has used the IMF and the World Bank to keep Pakistan afloat, because the aid inflows of the two institutions have been a very important source of funding Pakistan. Indeed, perhaps the principal argument for continuing to support the USA is this ability of the IMF and World Bank to make it impossible for Pakistan to continue to pay its way if they began to refuse its money.

One problem with the money they give is that it has to be repaid. The current IMF programme is meant to keep Pakistan intact, by enabling it to pay back to the IMF money it had previously lent it. Thus the IMF presently gives Pakistan no cash; rather it merely makes book entries which mean that the repayments it should have gotten are postponed to later. The question that arises is that does Pakistan really need this money?

It should be noted that there are actually two different entities which need this money, for two different purposes. Firstly, the government of Pakistan needs money to meet its expenses, which exceed their revenues. Secondly, the Pakistani people need foreign exchange, which the IMF and World Bank both provide, in excess of their export earnings, so as to pay for imports. It could be said that the government, looking after the interests of the people, tried to get this money, but it must never be forgotten that it has its own running. The government has the power to raise taxes to pay the debt, and to tailor foreign policy on the lines dictated by those lending. The first requirement is that the people be convinced of the need for these loans, thus the beast of default has been constructed, even though the effect on people would be of inflation, as well as the shortage of certain goods. Pakistan would be obliged to import only what it had enough foreign exchange to pay for, not anything else it wanted.

Not just the government would be affected, but also the personnel of government. It would no longer be easy to send abroad the proceeds of corruption, which are presently laundered into foreign accounts. In a worst-case scenario, it might become impossible, and thus cannot be allowed to happen. As the country’s foreign debt is serviced by the Pakistani taxpayer, it becomes virtually a no-brainer for the bureaucracy. The Finance Minister, even if he is, like Ishaq Dar, a chartered accountant by training, merely reads out a speech which has been drafted for him by bureaucrats, with some input from him. However, apart from a few measures, he merely follows the script written by civil servants. That is how Dar presented his first budget in 2013, hardly a month after the general election that May. Though only some hurried input went into that budget, he owned it totally.

An idea of how much free-spending governments have burdened the taxpayer, can be seen from the Rs 1280 billion budgeted for debt servicing, of the Rs 3166 billion budgeted for current expenditure. This is the largest sum the government has to find, more than either the 923 billion budgeted for development expenditure or the 781 billion that is to go to defence. It was also once less than either, but contrary to a common impression, will not all go abroad.

A lot of that money is supposed to go to service domestic debt, and is paid in rupees to the banks, which have taken up that debt by obtaining government securities. Though they will not demand the principal amounts, they will demand payments of interest on time. In fact, that is the part of the budget that must be made. If the defence budget is cut, for example, we may end up being overrun by barbarians, but we will not default. If we fail to make a payment on time, we will. That is to be avoided at all costs.

This budget has been projected as being pro-growth, that might or might not be true. The present government has been in office for two fiscal years, and it has missed modest growth targets in both. There is no reason to assume that it will obtain the 7 percent GDP growth it has targeted for 2017-18, by which time it has also pledged to bring the fiscal deficit down to 3.5 percent of the GDP. Pakistan needs to grow at 7 percent consistently, not just occasionally, and that too for several years, if it is to become a developed economy. Indeed, growth should probably be about 8 percent, to make up for all of those years, decades rather, when growth was below 7 percent.

The basic functions of government may well be defined as the three D’s, defence, development and debt, where it is because of the first two that it incurs the third. Actually, it needs the third more, so that its personnel, both political and permanent, might go on pretending that the taxpayer exists to pay the debts they incur. This budget did not break through this paradigm.