LAHORE: A peek into the upcoming budget showed that an ambitious Gross Domestic Progress (GDP) growth target of 5.7% had been set and Prime Minister Nawaz Sharif had also given his blessings for the target by saying that if it wasn’t for agricultural goals, Pakistan would have also achieved the previous year’s target GDP.
In theory it seems refreshing that Pakistan’s finance planners and policy making economists are hopeful for a five per cent increase but before believing on its validity and possibility, a brief review of the past two budgets is necessary.
In 2013-14 budget, the total outlay was set at Rs 3,985 billion. This was a rise of more than 24.4 % than the previous year’s budget but the resource availability was estimated around Rs 3,011 billion. The net revenue receipts were estimated at Rs 1,918 billion. The deficit was to be financed through borrowing form banks. The size of Public Sector Development Programme (PSDP) for 2013-14 was Rs 1,155 billion. Out of this Rs 615 billion was allocated to provinces.
In 2014-15 budget the total outlay was Rs 4,302 billion which showed a 7% increase as compared to the previous year’s estimates. Resource availability was estimated at Rs 4,074 billion and the revenue estimates were Rs 2,225 billion. Out of the total estimated Public Sector Development Programme expenditure of Rs 1,175 billion, Rs 650 were allocated to provinces. Other development expenditure for the Fiscal Year (FY) 2014-15 was approximated to Rs 162 billion.
The expenditure side of the budget is estimated on several variables including past years’ expenses and inflation. To finance those estimated expenditures the main source of revenue is considered to be taxes however in Pakistan taxes barely meet the expenditures. For the FY 2013-14 the estimated tax (indirect and direct) revenue Rs was 2,598 billion which only made for 65 per cent of the total estimated expenditure. Likewise, in FY 2014-15 the estimated tax was 3,129 billion which made up for a little over than 70 per cent of the estimated expenditure.
Tax revenue only made up for 65 per cent of total expenditures in FY 2013-14 and 70 per cent in FY 2014-15.
Now let’s take a look at the economic performance of Pakistan for the past two years, with these expenditure estimates. The GDP was 4.14% in 2013-14 and 4.24% in 2014-15. However, it is of crucial importance to note here that inflation rate was around 8.7% in both the years. This means that the revenue and GDP figures that were derived are in most par inflated due to the generally high price level as opposed to the actual improvement in economy. Likewise, public debt stock reached at Rs 15,534 billion at the end of March 2014 and was recorded at Rs 16,936 billion at the end of March 2015.
Inflation and rise in public debt are both strong signals to show the lapses in the overall performance of the economy.
Now we are heading to another budget with Rs 1.675 trillion development outlay including Rs 800 billion as federal PSDP and Rs 875 billion as provincial Annual Development Programme (ADP). There is no denying that the Pakistan’s economy had shown signs of improvement, but before we could feel that our job is done, we need to ensure that the gains that are visible in numbers are not inflated solely by the inflationary pressures and the benefit of greater GDP is not being cancelled out by a multiple times increase in debt. Equally important is the issue of the equitable distribution of the benefits of progressing economy which is not automatically achieved by economic growth. In a nutshell, while it is promising to see a higher GDP target being set, we still have a long way to go before we can take pride in having accomplished true economic betterment.
