FY23 budget: some new avenues

Pakistan is currently facing a series of challenges. The coalition government, led by Shehbaz Sharif, is trying to bridge the trade deficit, expected to be over Rs 5600 billion in the coming budget for fiscal year (FY) 2022-23. Political instability is shaking the trust of investors and is adversely affecting economic activity in the country. Simultaneously, the role of superior judiciary is also allegedly creating uncertainty, which can shake the trust of people in the judiciary.

Apart from these challenges, the incumbent government is all set to present the most crucial budget at a time when the country is facing the risk of default. Through the upcoming budget, the government wants to improve overall resilience of economy by introducing various measures. These measures include incentivising the most vulnerable segments of society.

However, the main challenge for the government will be bringing fiscal consolidation in a situation where our debt burden has increased alarmingly, and growth has shrunk beyond sanity. Resultantly, despite the imposition of heavy indirect taxes in the last four years, our apex revenue collection agency may not meet its revised target of Rs 6.1 trillion.

According to the World Bank, the share of imported goods and services is 20.32% of the GDP whereas our exports are 10.12%. It is a fact that the role of exports cannot be ignored in modern economies. Despite offering various subsidies and incentives to the export-oriented sectors, our export could not contribute significantly. There are several factors for curtailment of exports, which include passive foreign policy, complex trade laws, persistent energy crisis, and increasing global barriers.

In existing circumstances, the government needs to look for different avenues for generating foreign exchange reserves. Reliance on technology has increased tremendously. Pakistan needs to focus on the Information Technology. In 2021, the IT sector of India yielded export revenue of around US$150 billion. Their Reserve Bank Survey indicates that India’s total software export was of around US$ 148.3 billion in 2020-21. On the contrary, Pakistan’s total revenue through IT exports was around US$ 3.5 billion.

Another factor that can play an important role in boosting foreign reserves is human resource export. As per World Bank Report, India’s inflow of foreign remittance for the year 2021 was US$87 billion. The major portion, 20% of their total remittances came from United States. India is expecting 3% increase in its remittances in 2022 — it would receive around US$89.6 billion whereas Pakistan is expecting to receive around US$31 billion only during 2021-22. In the upcoming budget, the government needs to focus on introducing structural reforms in the education sector.

It is the primary responsibility of the government to provide access to education to every citizen. In the current situation, it has become very hard for the middle class to take admission in any university. Their entry into both public and private educational institutions has become tough. There are no alternative funding facilities available for students that can facilitate for payment of their educational dues. The government needs to realise that without investing in people, the desire to see a prosperous Pakistan cannot be accomplished as only highly educated and skilled manpower can ensure steady increase in remittances — we lack both.

Another factor, constantly ignored by both the civil and military leaderships, pertains to our defence-related exports. It is a fact that Pakistan has always been cognisant of its defence needs and is aware of the challenges that are constantly emerging from neighboring borders.

The competence of our defence institutions is unmatched despite the scarcity of financial resources and economic challenges. Pakistan is the seventh country in the world and the only Muslim-majority country to possess nuclear weapons, which is testimony to the fact that our nation and armed forces are absolutely clear about maintaining their right to self-defence and deterrence.

We need to realise that the technological landscape of the world is changing at an unprecedented pace. From medical sciences to lifestyle and to modern warfare, every field is subject to advancement. Against this backdrop, every country is striving to make its defence impregnable and equipped with the latest technology. Pakistan has successfully managed to keep up pace with this, and the latest marvel of Pakistan-China’s strong friendship, China Joint Fighter (JF-17) aircraft, has been pivotal in the achievement of this objective.

The state-of-art avionics, optimally integrated sub-systems, computerised flight controls, and capability to employ the latest weapons provide a decisive advantage to JF-17 over adversaries of the same class. This all-weather, multi-role light fighter has remarkable high combat maneuverability at medium and low altitudes. With effective firepower, agility, and combat survivability, the aircraft is likely to emerge as a potent platform for any air force. It has been subject to continuous development and up-gradation vis-à-vis the Avionics suite, flight controls, and weapons carrying capability, and over the years, three blocks of JF-17 have been produced.

Pakistan’s advancement in aerospace technology is expected to provide a dual benefit. It will help to replace the current aging fleet of planes with new ones that will provide a technological edge and at the same time, this is an opportunity to capitalise on this benefit and export this battle aircraft to other countries.

Pakistan is already exploring opportunities in the Middle East, Africa, and Asia for export of these state-of-the-art aircraft. News reports suggest that talks have reached advanced stages of negotiations with Iraq, Argentina, Azerbaijan and Sri Lanka, whereas transactions with Myanmar and Nigeria have already materialised.

Export of these high-value and strategic aircraft is not as similar as routine items. It requires high-level and coordinated efforts to persuade other nations. The Foreign Office of Pakistan can play an important role in bridging the gap between Pakistan and the international world. We need a paradigm shift in our current foreign policy that isolates us from the global community.

It is about time the government, apart from facilitating other sectors in the upcoming budget should be considered investing in the export of skilled human resources as well as defence exports. Pakistan can generate significant revenues through these two sectors as compared to traditional exports.

However, both these sectors, intrinsically connected to political stability and progressive foreign policy, cannot perform amidst the highest debt and low growth — posing continuous threats to economic viability of our state. Unfortunately, undue interference by institutions in political matters has brought us to a position where we are struggling for our economic survival. Our political leadership, civil-military establishment, and judiciary need to realise that political stability is the key for sustainable economic development that can alone generate dividends for years to come.

(Huzaima Bukhari & Dr Ikramul Haq, lawyers and partners of Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS), members Advisory Board and Visiting Senior Fellows of Pakistan Institute of Development Economics (PIDE). Abdul Rauf Shakoori is a corporate lawyer based in the USA and an expert in ‘White Collar Crimes and Sanctions Compliance’)

Copyright Business Recorder, 2022