Pakistan’s Budget Analysis For The Year 2017-18


It’s that time of the year when the entire nation waits to see what the new budget has to offer. How it will affect their daily lives? On May 26, the PML – Nawaz led government presented its fifth and final budget prior to the upcoming elections.

The new PKR 4.75 trillion expenditure plan is focusing more on boosting growth. A figure more than 8% compared to last year’s budget. Federal Finance Minister, Mohammad Ishaq Dar, presented the fifth budget of the incumbent government on Friday. He claims that the country will record a growth rate of almost 6% in its (GDP) during the fiscal year 2017-18.

Despite claims of economic recovery by the government, the announced budget has been met with skepticism by critics and opposition political parties. Analysts believe that the PKR 1 trillion allowance for federal development and infrastructure projects is a waste. This marks an increase of up to 25% from last year.

So, how exactly is the government planning to spend taxpayers’ money? Will it be able to deliver on all its promises?

 The Biggest Red Flag

The main strength of this year’s budget is that it is an integral part of a new growth strategy to achieve sustainable and inclusive growth.

The limitations of the budget lie in the fact that the government has not allocated money where it matters. For instance, the most important sector through which long-term growth can be sustained is human development. However, the government increased health expenditure from PKR 29 billion to PKR 49 billion only.

Many analysts believe that the government should increase health expenditure fourfold in order to reach Sri Lankan standards. For those who are not aware, Pakistan’s health expenditures as a percentage of GDP are the second lowest in the world. Similarly, the funds allocated to education are nowhere near what is required to offer high-quality education to all. Again, Pakistan’s expenditure on education as a percentage of GDP is  ranked 164th out of 173 countries.

 

 This Budget Is A Deception

Analysts were hoping that while presenting the last federal budget of its current tenure, PML-N government would wake up to reality and would present the real picture of the economy. However, against their hopes, the government has only presented an imaginary picture of the economy. An economy, which analysts believe is nothing but deception.

The current expenditure is a perfect example to highlight the fact that the government is not putting its money where its mouth is. The government plans to spend PKR 3,477 billion on account of current expenditure during the next fiscal year. However, in 2013-14, the current expenditure as per the Ministry of Finance’s data stood at PKR 4,005 billion. In 2014-15, it increased by 11 percent and in 2015-2016 it further went up by 6 percent to PKR 4,694 billion.

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Moreover, during the first nine months of the current fiscal year (July 2016 – March 2017), the government spent PKR 3,605 billion on account of current expenditure, which implies that by June the figure would touch at least PKR 5,000 billion. Now, how would the government be able to reduce the current expenditure in the upcoming fiscal year. This is an important question, particularly with an increase of 10% in the salaries of armed forces and civilians.

Neglecting Education

The budget speech by the finance minister saw him stacking assertions of achievements. What’s important to note here is the fiscal space this budget has given. This is all because of the increase in tax to GDP ratio from under 10% to 12.6%. However, the question here to ask is, what does this improvement mean? Will Pakistan allocate more funds to education sector?

As per the finance minister, Pakistan’s gross national income per capital in 2017 is now at $1,610 – up from $490 in 2000. Situation has gone worse as the country’s income levels have increased. This means that 22.6 million children in the country are not going to school. Therefore, while income levels in Pakistan have grown, the country’s education investments are very limited and the existing resources often do not offer the desired results.

We’ ll have to wait and see whether the new budget will be able to fulfill government’s objectives or not.

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