Boredom or Apathy: The most uneventful Budget of the last two decades

We are living through a once in a century pandemic, and there is no flattening that proverbial curve in the near term. A tail-risk which has wiped out economic activity across the globe, pushing policy makers to choose between lives, and economic growth. No one knows when its going to end – people are willing to sacrifice their lives for the sake of partisan politics, and here we are with a Federal Budget, which is the most boring, and uneventful budget of the last two decades.

It looks like the work of an accountant, who was tasked to ‘balancing’ the books without giving much thought to underlying economic rationale. The budget does not give any clear economic direction. The policy makers are either fatigued, or just too bored to even think, or bother with managing the economy anymore. This isn’t a pandemic coupled with a locust attack budget – this is a ‘lets wrap this up and go to Nathiagali for the weekend’ kind of budget.

In a time when all guns need to be loaded, all tools whether conventional or unconventional need to be leveraged – but here we are with copy-paste of a template driven prescriptive approach of one of our major lenders. Pakistan got its first economic contraction in the last 68 years, but it is being presented like a new normal. This is the time for unconventional policies to stimulate Aggregate Demand, to spur economic activity, to put cash in the pockets – the budget fails to do any of that.

Going into specifics, little to no effort has been put into expanding revenue base – a large chunk of economic activity happens outside the tax net, and despite efforts in the last few years, the incumbent government has most likely given up on expanding the tax net. A 73 percent increase in Petroleum Levy seems like probably the only thing the policy makers have control over. A silver lining is absence of any tax increases for the salaried segment, although real wages will be going down significantly, dampening Aggregate Demand in the process.

It is even futile to talk about military expenditure because that is the bare Minimum required to maintain a formidable military in a hostile environment. We have a revenue problem, and successive governments have failed to crack this problem

Expenditure has been squeezed, pointing towards austerity, at a time when austerity is the last thing that is required for stimulating the economy. Even welfare payments through BISP have been cut down. Austerity will further dampen Aggregate Demand, which means lower economic activity, and consequently lower tax collection. Do we really want to be stuck in a low-growth loop – because this is what everything is pointing towards.

Some may call this a business-friendly budget, some compromised by partisan politics may even call it a great budget, but it got a very status quo feel to it – its not a crisis budget. The country is going through a crises, a rare combination of health and economic crises – but policy makers seem to be as calm as a cucumber. Setting a target of real growth rate close to, or less than population growth rate is not an ambitious feat, it just reeks of apathy, and a lack of ambition resulting in a festival of mediocrity.