Budget blues.

Byline: Rashid Amjad

THESE are challenging times, however you describe them: The Great Repression, The Great Pause or The Great Lockdown. And the unenviable task of preparing next year's budget for a $300 billion economy and 220 million people in these most uncertain of times falls on the shoulders of the finance ministry.

To start with, there are some ground realities it must face. We are still under a stringent IMF Extended Facility Fund programme with all its conditionalities. These will most certainly be modified in the changed circumstances, but not completely ignored. It is important that we continue firmly with the programme. It would be a grave mistake if, during this period of unparalleled global uncertainty, we are seen as living up to our past reputation of a one-tranche borrower!

Arguably, the government should adopt a three-month flexible rolling budget for next year within a conventional annual budgetary framework and supplementary grants to help shift resources within. This would be a pragmatic response to the prevailing uncertainty and provide a mechanism for reconciling expenditures with priorities that are in considerable flux.

A strong justification for this approach is that, at least for the first three months starting July 2020, next year's budget would need to set aside maximum funds based on a worst-case scenario for direct income support to the poor and unemployed workers, together with financial support to medium and small businesses. This would, in the first instance, quickly exhaust the little funds we would have left on our expected revenues after paying for recurring defence expenditure, debt, and government salaries and pensions.

There may be some funds left over from the $1.4bn we received in April from the IMF, and some support could be expected from donors, the World Bank and ADB. These funds would, however, probably be far short of the amount needed to address the challenges we will face during the rest of the year, necessitating a quick shift in priorities and resources. As for debt relief on foreign loans, despite the prime minister's valiant efforts, it would be prudent not to build up our hopes and next year's budget on any substantial relief under this head.

The government should adopt a three-month flexible rolling budget for next year.

This continuing resource crunch is already reflected in the indicative allocation (budget ceiling) given to the planning ministry of Rs600bn (of which Rs70bn will be...