Is budget 2021-22 old-fashioned ? | By Dr Sami Ullah


Is budget 2021-22 old-fashioned ?

CURRENT PTI government has presented budget 2021-22 in the time of technological advanced and sustained era for the survival in globally competitive environment.

This is very critical time regarding the decisions of state expenditure because the pattern of production, consumption, trade, employment and coordination has changed after the launch of post-2015 development agenda and the COVID pandemic.

The traditional production, consumption and state decisions are not helping the poor nations to compete with the globe at any level.

For the sustainability and prosperity, there is dire need to take some initiatives that are in line with global standards during the budget and policy design process.

The budget 2021-22 is traditional in nature because we have missed the important aspects of sustainability in adjusting the priorities.

Our budget is based on economic growth by following the “trickle down hypothesis” and our political leadership is very hopeful to reap the benefits of this hypothesis but currently it looks very hard to sell the trickle down.

In reality, trickle down hypothesis become invalid and in developing economies there is no evidence of its success for the last many decades.

So we are developing the building of prosperity on weak pillars because the societal and institutional setup is not favorable for ensuring the benefits of trickle down for the masses in Pakistan. Majority of development practitioners have rejected this hypothesis in the last century.

On the other hand, our budget is very traditional in nature by just focusing on balance sheets by ignoring the leading barriers in the way of sustainable development.

There is no concrete initiative for poverty alleviation, gender equality, human development, rural transformation, inclusive provision of internet access, health facilities, etc.

This budget looks like a banker’s document and socio-economic aspects have been ignored by prioritizing the settlement of numbers game with attractive digits.

As everyone knows that the patterns of growth, employment, information, production, has changed for the last many years.

So, we have to set the priorities in line with global perspective otherwise have to accept a new trap of under-development by considering it as the thrift.

It is also worthwhile to share that the total amount of budget 2021-22 is Rs 8.487 trillion, out of which Rs 3160 billion allocated for debt financing, Rs 1370 billion for defence, Rs 1168 billion for provinces, Rs 682 billion for subsidies, Rs 640 billion for pensions and only Rs 964 billion for the public sector development programs (for developing human capital and improving the infrastructure).

This shows that a significant portion of the budget has been planned to spend on un-productive domains which can be considered as the major hurdle in the way of development.

Washington consensus has convinced the poor nations that you have to minimize the size of government because there are certain inefficiencies and loopholes in the bigger public sector.

The un-productive expenses of public sector and their deficits are the major burden on the state and this can only be managed by minimizing the state net.

To ensure efficiency, state can manage the only sectors where excludability is not possible and leave the rest for private sector.

Another cause of inefficiency and burden is that a variety of departments are working on the similar goals and state can merge the relevant departments for the delivery of appropriate interventions.

Such sort of actions will not only lower the state burden, but also ensure the efficiency of the institutions.

In a recent survey of OXFAM Pakistan, more than 90 percent population is not concerned with the performance of GDP, per capita income, fiscal deficit, but they are interested in poverty alleviation, employment generation, deflation and access to basic needs. Our budget is based on economic growth, not on economic development.

There are two schools of thought; firstly “take care of the GDP, it will take care of the poor” this is some sort of trickle down hypothesis and has not worked for the development of the poor regions.

A renowned economist William Easterly explained the phenomena of Pakistan in his very famous article “Political economy of growth without development in Pakistan” and explained that Pakistan is the interesting country where economic growth has been observed but without prosperity.

Second approach is “Take care of the poor, they will take care of the GDP” and this is in line with current global agenda of Sustainable Development Goals (SDGs), generally known as “Post-2015 Development Agenda”.

The GDP growth of Pakistan is highly instable for the last 70 years because our focus is on growth-oriented strategy, whereas economic sustainability is only possible with the investment in the people, the real wealth of any nation. If we prioritize the investment in masses, it will enhance and sustain the growth easily.

In current scenario, our political leadership is requested to please focus on the expansion of capabilities of the masses and they will become important asset for the country.

This is the only track of prosperity in the long term for sustainable development and budget allocation is the first step toward this journey.

For global competitive environment, there is a dire need to allocate significant resources for inclusive technological access, expansion in the health infrastructure, investment in human capital and special focus on the youth for expansion in employment opportunities.

Such initiatives can directly intervene in the process of sustainability and there is no need to wait for the trickle down to work.

—The writer is Assistant Professor in Economics, University of Gujrat.

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