Time to end the bloodbath
Our budget deficit, at over Rs5 trillion, is at a historical high. In percentage terms, our budget deficit is a worrisome 8 percent of our GDP.
Our trade deficit has shrunk compared to last year but during the first three months of the current fiscal year our trade deficit amounted to $9.2 billion.
The twin deficits of budget and trade are a sure shot precursor to a severe economic crisis. The twin deficits of budget and trade mean three things: an extreme shortage of dollars, devaluation of the rupee and capital controls.
The twin deficits of budget and trade almost always result in three things: food inflation, food insecurity and shortage of fuel.
The twin deficits of budget and trade almost always have three consequences: electricity load-shedding, food quotas and petroleum quotas.
Persistent deficits of budget and trade forces a country to default on debt obligations or beg for rescheduling of debt.
For the past 7 decades, we have been bartering our geostrategic value for concessions from the US, the World Bank, the Asian Development Bank, the Paris Club, China and waivers from the IMF.
Between 1951 and 2011, we got $67 billion from the US in the form of economic assistance and military aid.
We now owe $33 billion to multilateral organizations, $27 billion to China and $10 billion to commercial creditors. We are a ‘front-line state’ no more. The US is no longer willing to give us concessions-neither are the World Bank, the Asian Development Bank or the Paris Club.
As we beg for concessions, there is a bloodbath going on in our Public Sector Enterprises (PSEs). Our so-called PSEs take on additional debt of around Rs700 billion a year. The government doles out around Rs1,200 billion in so-called ‘grants’.
The government hands out around Rs664 billion in so-called ‘subsidies’. That is an annual burden of nearly Rs2,500 billion. We must end this bloodbath because no one is willing to finance this bloodbath anymore.
As we continue to beg for concessions, there is a bloodbath going on in our power sector. Just last year, the government lost a colossal Rs520 billion in the electricity sector alone.
In the natural gas sector, the Unaccounted-for-Gas (UFG) amounts to over $4 billion a year, every year.
We need to move away from a ‘single-buyer model’ to a ‘multiple buyer multiple seller model’. We must end this bloodbath because no one is willing to finance this bloodbath anymore.
As we continue to beg for concessions, there is a bloodbath going on in our public procurement sector.
The government’s public procurements amount to over Rs7.5 trillion a year. Rough estimates of ‘leakages’ in this Rs7.5 trillion ‘business’ vary from a low of 25 percent to a high of 50 percent. Lo and behold, these ‘leakages’ amount to a low of Rs2 trillion a year to a high of Rs4 trillion a year, every year.
We must adopt e-procurement to “digitally transform public procurement systems to achieve enhanced efficiency, accountability and transparency”. We must end this bloodbath because no one is willing to finance this bloodbath anymore.
As we continue to beg for concessions, there is a bloodbath going on in the government’s ‘Commodity Operations’ where ‘Commodity Operations Debt’ now stands close to Rs1 trillion.
The government fixes the ‘procurement price’ of wheat. The government fixes the ‘procurement price’ of sugarcane.
This model has failed-failed miserably. The ‘incidentals’ and ‘corruption’ in this sector is estimated to be around Rs200 billion a year, every year. We must end this bloodbath because no one is willing to finance this bloodbath anymore.
Yes, we have a choice: end the bloodbath or head towards fuel shortages, food shortages, load-shedding and shortages of life-saving drugs.
