Uncertainties and aspirations.

'Uncertainty' was perhaps the best description by Dr Abdul Hafeez Shaikh of the next year's federal budget. He had valid reasons. But this corresponded well with the usual criticism of an 'unrealistic' budget with 'ambitious' targets.

To begin with, the budget seeks to increase the Federal Board of Revenue's (FBR) tax collection by almost Rs1.06 trillion or 27 per cent - i.e. from Rs3.9tr to Rs4.963tr - without a revenue plan or 'any new tax'. The budget speech and documents had left this unaddressed, but Dr Shaikh explained it in his post-budget briefing in a transparent manner.

'Pakistan is such a big country that Rs1,000bn additional revenue is not a big thing if the economy gets revived. But nothing can be said with certainty when the situation will get back to normal and when demand will pick up in countries where we export. I cannot say with much confidence, but we have to make best efforts,' he said. 'We have kept aspirations in this budget.'

That means even if the economy grows more than double the targeted 2.1pc growth rate, though highly unlikely, the authorities will need to come up with a backup revenue plan maybe in three to six months for a minimum of Rs500 billion. Based on the projected rate of inflation and GDP growth, the automatic increase in revenue could be no more than Rs350bn. About Rs200bn additional revenue is anticipated through minor tinkering with existing tax rates or procedures including those relating to documentation.

That takes us back to the 2019-20 budget in which the revenue target was set at Rs5.55tr. The year closed with Rs3.91tr after Covid-19 hit the country. But Dr Shaikh also conceded that expectations before the pandemic were that Rs4.7tr-4.8tr revenue could be achieved. So the shortfall of around Rs800bn was officially anticipated even before the pandemic.

The final gap is now estimated to be around Rs1.65tr that works out at almost 4pc of GDP. We have the history of revenue slippages, but this is a rare phenomenon. Tax collections have actually gone down for two consecutive years. That gives reasonable evidence to suggest the revenue target is not only ambitious but also uncertain.

Therefore, the fiscal deficit target pitched at 7pc of GDP or Rs3.2tr becomes unrealistic at the very outset - even before the budget is passed by parliament. Almost everybody dealing with the budget knows that 9pc, give or take 0.5 percentage points, is going to be the final fiscal deficit next year based on...