Contrary to earlier reports that the budget for next fiscal year will be presented to parliament on the 7June it is now expected to be presented on 10 June – a Monday instead of the more usual choice of a Friday.
The reason is the visit to China by Prime Minister Shehbaz Sharif scheduled for 5 June accompanied by the Finance Minister Muhammad Aurangzeb – two key members of a cabinet whose presence in parliament on the day the budget is presented is anticipated.
There is no doubt that the visit could have easily been adjusted to ensure the presentation of the budget on 7 June which would have allowed the government 16 working days for deliberations in the finance committee (assuming that the committee meets every day, including Saturdays but not Sundays, and not on the three days of Eid holidays) and re-laying on the floor of the house for its passage by parliament before 30 June, the last day of the current fiscal year for which a sitting government is empowered to release/disburse funds under any specific expenditure item.
If the budget is presented on 10 June the government would have two days less for deliberations and passage by the House.
While a simple majority is enough to pass a budget requiring 169 out of the total 336 national assembly seats yet it must be borne in mind that a total of 22 reserved seats allocated by the Election Commission of Pakistan to parties other than Sunni Ittehad Council (SIC) did not reflect an allotment in proportion to the number of parliamentary seats they won in the 8 February elections, as per the apex court decision.
This leaves 314 seats as the grand total of sitting members of the national assembly, which implies a simple majority of 158 seats.
The following is the party-wise strength today: PML-N 105, PPP 67, MQM 21, PML-Q 4, IPP-4 and BAP 1.
In other words, the PML-N would have to get PPP on board before it can pass the budget and in all likelihood Chairman Bilawal Bhutto Zardari will provide considerable input for change and/or additional resources for Sindh from the federal Public Sector Development Programme (PSDP).
The SIC has 85 members who are expected to present a unified front in challenging a lot of the budgetary provisions on the expenditure and revenue side of the balance sheet in the finance committees of the two houses as well as in parliament.
To complicate matters further is the fact that the government requested the International Monetary Fund (IMF) for a successor Stand By Arrangement (SBA) programme and its team concluded a two- week mission to Pakistan on 23 May 2024 and claimed: “significant progress towards reaching a staff level agreement on a comprehensive economic policy and reform programme that can be supported under an Extended Fund Facility (EFF).”
This statement implies that the budget provisions are a prior condition – an assertion strengthened by the fact that from July 2019 onwards the Fund engagement with Pakistan authorities has been on the basis of: (i) almost non-existent leverage in terms of phasing out extremely harsh up-front conditions especially relating to tariffs/levy on electricity, gas and petroleum products; and (ii) the press release uploaded on the Fund website dated 23 May stipulates that “the mission and the authorities will continue policy discussions virtually over the coming days aiming to finalize discussions including financial support needed to underpin the authorities’ reform efforts for the IMF and Pakistan’s bilateral and multilateral partners.”
This indicates that the onus of borrowing from friendly countries will, as in the EFF 2019 and the SBA 2023, continue to rest with the government of Pakistan rather than with the Fund in spite of the following statement on its website, “in low income countries IMF lending is also typically meant to catalyze financial support from other donors and development partners.”
And perhaps it is this aspect of the Fund’s engagement with the country that prompted the Prime Minister to defer the budget presentation and seek assistance from the Chinese on possibly three urgent matters. First, the need for a roll-over of Chinese funds parked at the State Bank of Pakistan till the end of the EFF that has yet to be approved by the Fund.
Second, renegotiations on the payment due on power generation contracts signed under the umbrella of the China Pakistan Economic Corridor (CPEC), a request that China has so far refused to entertain arguing that it would imply similar contracts with other countries to be renegotiated.
Reports indicate that the Prime Minister may seek a possible deferral of these payments. And, finally, the foreign direct investment under phase II of CPEC that the Shahbaz Sharif-led Special Investment Facilitation Council argues would be the game changer for this country’s economy.
There is no doubt that the government is between a rock and a hard place – its maneuverability is severely limited to either take cognizance of its allies’ recommendations/suggestions relating to the budget or to convince the Fund that unlike in the past, it will implement all the agreed reforms. It is therefore a foregone conclusion that the passage of the budget will require considerable assistance from all stakeholders, both within and outside parliament.
Be that as it may, the stakeholders have little control over the simmering public discontent due to inflation in spite of the fact that it has been registering a steadily declining trend since peaking in December 2023 at 29.7 percent and reaching a commendable rate of 17.3 percent four months later in April 2024 –a decline even more impressive when compared with the 36.4 percent rate in April 2023 rising to 38 percent in May 2023.
This rate is expected to rise with administrative measures that without doubt are a component of the next EFF, the focus on raising revenue that would necessitate continued reliance on indirect taxes (as widening the tax net remains in the registration now and taxing later stage) and finally the unlikelihood of the government reducing its current expenditure drastically to increase its leverage with the multilateral and bilateral donors.
To conclude, the only way out for the government is to convince the elite – those who are the major recipients of all previous budgets’ largesse both in terms of expenditure allocation and revenue source – to think of the degrading plight of the rising number of poor (poverty levels currently stand at 41 percent) and voluntarily make sacrifices for at least two years.
Copyright Business Recorder, 2024
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