Reality unleashed in the budget documents.

Byline: KHALIL AHMED

Conversation with Dr. Ayub Mehar, a renowned economist

PAKISTAN and GULF ECONOMIST had an exclusive conversation with Dr. Ayub Mehar regarding FEDERAL BUDGET 2022-23. Excerpts of the conversation are as follows:

Though federal budget 2022-23 has been discussed by the various segments of the society including supporters of the coalition government, PTI supporters, business community, salaried persons and common people, however, the most considerable point is that all the comments on the budget are based only on the budget speech and the 'Salient features of the budget' prepared by the Ministry of Finance and presented by the Finance Minister. But, reality is unleashed in the budget documents.

One can't ignore the fact that it is the first budget after the autonomy of the State Bank of Pakistan (SBP). The law of autonomy of the SBP was legislated by PTI government last year. Certainly, the autonomy of a central bank limits the ability of government to finance its fiscal deficit through monetary system. To finance its deficit, government has to rely on borrowing from commercial banks and debt markets at the prevailing interest rates. In the present context of global economic situation and negotiations with the International Monetary Fund (IMF) to maintain the required level of foreign exchange reserves, the external borrowing has a difficult option. Despite these facts, fairly a sizeable borrowing (4.6 trillion rupees) from domestic and external sources have been proposed in the budget document. It will lead to higher interest expenditures in the future, while lending to private sector from commercial banks may be adversely affected.

Another important notable point is that GDP growth estimated by PTI government was 4.8 percent but the present government has declared that actual growth was achieved by 6 percent. In this case, it should be considered a remarkable achievement of the PTI government and a surprise in the economic history of Pakistan that actual growth has surpassed the targeted growth in GDP. However, the present government has admitted that this higher level of growth will not be possible in its tenure in 2022-23. The targeted growth rate by the present government is 5 percent.

According to the economic survey 2021-22, the rate of inflation was 11.3 percent. This rate of inflation is based on 'Consumer Price Index (CPI)' which was 3.9 percent in 2017-18. The rate of inflation on sensitive price index which...