What have we won & lost?
ON 9 June 2023, the Federal Government of Pakistan unveiled its budget for the forthcoming fiscal year 2023-24. Rather than being a budget for an election, the budget has been constructed responsibly. For the next fiscal year, the government has set a moderate goal of 3.5% GDP growth. Some analysts have criticised the budget for being overly preoccupied with short-term benefits and failing to do enough to solve the economy’s long-term problems. Some other analysts commended the budget for its emphasis on financial restraint and dedication to improvements. Some of the budget’s major features include the following: 3.5% GDP growth target: The administration has set a modest 3.5% GDP growth objective for the next fiscal year. This is a lower growth rate than the 6.5% attained in the prior fiscal year.
Fiscal deficit of 6.54%: For the next fiscal year, the government has forecast a fiscal deficit of 6.54% of GDP. This exceeds the 6.1% deficit objective established for the current fiscal year. A goal of Rs. 9,200 billion in tax revenue: For the next fiscal year, the government has set a target of tax collection of Rs. 9,200 billion. This is a 15% increase above the amount of taxes that were taken in during the current fiscal year. Target for remittances of $33 billion: The government has set a remittance target of $33 billion for the next fiscal year. This is an increase of 5% over the remittance received in the current fiscal year. 13,320 billion rupees in spending goal: For the next fiscal year, the government has set an expenditure goal of 13,320 billion rupees. This is a 10% increase above the cost incurred in the current fiscal year. The public’s response to the budget has been conflicted. While some individuals have praised the budget, others have voiced their disapproval. The budget will be heavily scrutinised to determine whether it can fulfil its objectives of fiscal restraint and economic development.
The budget will need to handle the following major issues: High inflation: Pakistan’s inflation rate has been continuously increasing recently and hit a record high of 13.8% in May 2023. Budgets for individuals and businesses are being put under pressure, and the government is finding it challenging to reduce its fiscal deficit as a result. At the moment, inflation is hovering around 38%. In contrast, the cost of petroleum has climbed by 72% and the value of the US dollar has increased by 75% during the past year. It will be difficult for individuals to purchase basic essentials of life both now and in the future, which presents a significant issue for the government. There are several treatments that can improve the economy without costing the government any money. The government can reduce inflation by increasing competition in the economy. This can lead to lower prices as businesses compete for customers. The government can set limits on how much prices can increase. This can be effective in the short-term, but it can also lead to shortages and black markets.
Declining foreign exchange reserves: Pakistan has little foreign exchange reserves, which is a serious situation right now. The huge trade imbalance and the decrease in remittances from Pakistanis living abroad, including the widening current account deficit, the depreciation of the rupee, and the repayment of external debt. Pakistan’s external debt is at an all-time high at the moment. Future interest payments will thus be a significant burden on the economy. In recent months, the Pakistani rupee has been losing value against the US dollar, and in May 2023, it hit a record low of 300.40 rupees to the dollar. As a result, imports are becoming more costly and inflation is increasing. Rising unemployment: The unemployment rate in Pakistan has been progressively increasing in recent years, and econometric models predict that it will trend at 6.40 percent in 2023 and 8.50 percent in 2024. The slow rate of economic expansion, the drop in industrial production, and the increase in the proportion of young people entering the labour force are all contributing causes to this.
Political unrest: There has been political instability in the country for the past many months. As a result, the economy is becoming unpredictable which makes it challenging for companies to make investment and expand. These issues are straining Pakistan’s economy and making it harder for the government to achieve its social and economic objectives. In order to solve these issues, the government has implemented a number of measures, such as increasing interest rates, depreciating the rupee and cutting back on expenditure. However, these actions haven’t yet been able to stabilise the economy or control inflation. To overcome these issues, the government will need to take further measures such as enhancing governance, decreasing corruption and making investment in human development and capital. The government will be able to improve the lives of its residents and set the economy on a course of sustainable growth if it can successfully handle these issues. For the budget to accomplish its objectives of fiscal restraint and economic development, it will need to take these issues into consideration.
—The writer is Editor-in-Chief, Inverge Journal of Social Sciences (IJSS), Islamabad.
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