Budgeting for citizens' care.

Byline: Jawaid Bokhari

BRAVING the challenges of falling tax revenues, reduced development spending, rising fiscal deficit and swelling debts, the prime minister's advisor on finance Dr Abdul Hafeez Shaikh expects the government to focus on mitigating sufferings of the people in the 2020-21 budget.

Deviating from the prioritised austerity agenda, Dr Sheikh in a recent television interview said: it is the basic principle of economics that when money comes in the hands of the people through government spending, it helps generate economic activities, job creation and in tackling the recession. So in the next budget, he elaborated, the government will mitigate sufferings of the people and give cash, food products and recreate employment opportunities.

In a bid to make that happen, Islamabad has secured the financial support of some $3.3 billion from multinational agencies for fighting coronavirus and its impacts on the economy. More fiscal space will be available from the one-year breather on debt repayments to G-20 states estimated at $1.9bn.

Similarly, the debt-servicing cost is likely to be reduced both by an anticipated further decline in the policy rate, with exchange-rate volatility remaining subdued because of cheaper imports of oil, as well as falling domestic demand further hit by recessionary headwinds.

Of the authorised federal development spending of Rs526bn - out of the annual Public Sector Development Programme of Rs710bn - nearly half of the amount remains unutilised

Owing to a rising slack in economic activities, banking spread in March has already dropped by 49bps year-on-year and 18bps on a month-on-month basis. Notwithstanding these positive developments, according to the International Monetary Fund (IMF), the debt-GDP ratio will go up to 90 per cent by the end of June.

While trying his best to enhance tax revenues reasonably, Dr Sheikh clarified that documentation of the economy will not be so strict that it will hurt businesses. Observing that the real players are businesses, investors, exporters, workers and farmers, he hoped to come up with a budget that meets the expectations of the people.

However, if one looks at the speeches made on International Labour Day on May 1 and recent events organised by social activists, it appears that the government and civil society are not on the same page. The participants of the May Day forum were of the view that the government is using tax money to bail out big businesses and...