A budget is a plan based on income and expenditure for a specific period of time. On June 12, the budget presented in the National Assembly for the Financial Year 2024-25 (FY 24-25) laid emphasis on collecting more taxes from citizens than collected last year, by ruling out the provision of non-tax filers and turning down any possibility of non-documentation. However, this was one half of the budget.
From the budget, the other half remained missing: the reduction of expenditure, especially non-development ones, to balance income. Every year, expenditures are enhanced and funds are disbursed, hardly supported by achieving income targets. Spending exceeds revenue and, consequently, a deficit appears, meeting which money is borrowed. The cycle goes on and on bringing Pakistan to this pass of teetering on the brink of sovereign default. Some Pakistanis still revel in the delusion that international financial institutions such as the International Monetary Fund (IMF) are bound to rescue Pakistan financially because of the country’s status as a nuclear power. They are mistaken. The IMF has already excluded the possibility of Pakistan’s debt restructuring, leaving Pakistan with no other option but to exact more taxes from people. The IMF wants the recovery of its loans with interest lest any civil war might erupt in a bankrupt country, as happened in Sri Lanka some time ago, decelerating the retrieval process.
Pakistan is fast realizing that the path to financial self-sufficiency passes through the thorny wilderness of taxation, rendering a sitting government unpopular among the masses. Whereas Pakistan has decided to introduce a harsh tax regime to collect more taxes, Pakistan has decided to raise its expenditures by 30 percent in FY 24-25. Disrespecting economic distresses, Pakistan has announced an increase in the military budget by around 18 percent. This turn of events has flabbergasted common citizens.
Suppose one could just listen carefully to a reporter of the DAWN news, Sana-ullah Khan, who laid bare the other half of the budget before Finance Minister Muhammad Aurangzeb and Chairman Federal Board of Revenue (FBR) Malik Amjad Zubair Tiwana during post-budget press talk, on June 13. The reporter said unequivocally that the finance ministry was least interested in reforming the system. Instead, it was trying to protect the economic interests of those who were already privileged. The reporter also enquired about the performance of the government in holding to account those thousands of Pakistanis, the properties of whom were revealed in the Dubai leaks. That is, the government is trying to tax the masses but the government is acquiescent to those who transferred money to Dubai. No one has asked about the source of their wealth. Their sources of income are unaccounted for. The FBR has to declare if the transferred money was legitimate (after being taxed) to move out.
The question-cum-comment of the reporter spoke volumes about what was being discussed privately among the masses. That one question exposed the lopsidedness of the budget. The imbalance may be a precursor to any unrest if the non-development expenditures of the government are not slashed. What the government overlooks is that people are getting loath of financial injustices. The question of the reporter has already stirred the masses into standing for their rights. Pakistan’s realities have turned economic. This country can no longer run on borrowed money. In principle, Pakistan must reduce its non-development expenditure substantially to radiate a message to the masses that the taxes collected from them will be utilized to balance the economy. The same would also be a message to the IMF that Pakistan is utilizing loans for balancing its budget, and not to find more avenues to spend the collected money. As per the proposed budget, in the FY 24-25, the FBR has to collect around 13 trillion rupees against 11 trillion rupees collected last year. This is a gigantic task given to the FBR, which may not be ready to deliver on the asked target. Exposed in the budget, Pakistan is doing a mistake of enhancing its expenditures in the hope that another 2 trillion rupees would be collected by the FBR. What if it does not happen? In such a case, Pakistan would be in a trouble deeper than it is confronting now. Pakistan has to understand that taxes are imposed to earn money to lower the rising budget deficit. Taxes are not imposed to get room to increase expenditures. Further, the IMF provides help to a country to let it enhance its earning sources to meet expenditures including the service of loans with interest. The IMF does not provide financial help to let the country keep on increasing expenditures, especially when these cannot be chased by earning.
The government has to reduce its expenditures and privileges in a show of solidarity with the masses. Otherwise, the government may find the masses reluctant to pay taxes. An apprehension is that the question-cum-comment of the reporter may become a guiding principle for the streets, a source of defiance.
Pakistan has to discard the fallacy that the forthcoming engagement with the IMF would be the last one. This may not be the case, as Pakistan has to pay almost $2 billion a month for three years to service external liabilities. The responsibility is too huge to be paid in the coming three years, especially if the trend of enhancing expenditure continues. Further, the proposed strict regime of taxation is bound to shrink the economy, besides affecting economic growth. The lower class may rely on the Benazir Income Support Program to sustain for the next three years, but what about the middle class. Hyperinflation is bound to hit this section of society hard.
The budget has yet to be converted into the finance bill. It would be interesting to watch if the other half of the budget – the expenditure side – is addressed.
Dr Qaisar Rashid
The writer is a freelance columnist. He can be reached at qaisarrashid@yahoo.com