The opposition’s budget controversy has little to do with the budget
Nobody in Pakistan remembers a budget presented by the government and hailed by its political opposition as fair, good and in the interests of the common man. Budgets are always traditionally rejected as ‘anti-people’ in Pakistan.
However, there are some unique things to note in the new budget before it goes into effect on July 1st.
First of all, no government has faced an economic crisis of the scale inherited by the PTI, with a heavy debt burden (two-thirds of which was accumulated during the ten years of PPP and PMLN rule), fiscal deficit, stagnant exports and an inability of the government to collect taxes.
The government has spent the first ten months of its tenure dealing with the symptoms of an economic crisis that was in the making for a decade. It has had to borrow heavily from friendly countries — Saudi Arabia, the UAE and China — to avert becoming a defaulter.
So far, the government has avoided portraying a rosy picture or taking populist economic decisions and it is engaged in “transitional” economic planning. For months before the budget announcement, government functionaries were talking about difficult times and tough measures ahead.
Second, to deal with the issues of a current account deficit and fiscal deficit, the government has adopted bold but politically unpalatable measures. In order to reduce the current account deficit — the difference between the import bill and export earnings — duties on ‘luxury’ goods were raised in January. This has paid off. The deficit has shrunk about 27 percent in ten months. The other measure is allowing the national currency to free-float in the market and lose its value against the US dollar. Since the PTI took power, the dollar has gained more than 33 rupees, reaching its highest level of Rs. 162.
The flexible exchange rate is meant to make imports expensive and exports cheaper in the international market. But there is a serious problem when a huge middle class is comfortable consuming imported goods and the international market share for Pakistani goods remains unchanged.
The parliamentary debate on the budget has centered more on accountability than on any meaningful critique of the actual budgetary proposals.
Rasul Bakhsh Rais
Third, although previous governments have gone to the International Monetary Fund 19 times for a bailout, this time it is different.
With low trust levels between the governments of Pakistan and the IMF, the latter has linked its package to verifiable measures and insisted on conditions that have been difficult for the government to sell to a public wary of inflation.
All political parties, leaders and economists know that structural problems in Pakistan’s economy were accumulated by political expediency, but governments in the past have balked at taking unpopular decisions, which is the curse of electoral politics. This government has taken some, like cutting subsidies on electricity, ending tax breaks for the export sector and rupee devaluation. Yet, it has still not gone all the way, fearing a political backlash from the opposition.
The fact is, the economy in Pakistan has become so politicized that reforms measures have become extremely difficult for any sitting government. This time, the opposition parties are doubly angered by an accountability clampdown with two top opposition leaders, Asif Ali Zardari and Nawaz Sharif, in jail.
And so they are using the budget to create and mobilize popular resentment. The big question is whether opposition parties have enough power to bring crowds to the streets in the coming months — though there is no lack of political will.
The parliamentary debate on the budget has centered more on accountability than on any meaningful critique of the actual budgetary proposals. The leader of the opposition, Shahbaz Sharif gave a long-winded speech full of political sloganeering. The statements of other party leaders were similar, without presenting any alternative budgetary proposals, particularly on how to generate revenues. Instead, they raised populist issues like demanding subsidies and asking for a reduction in taxes.
Interestingly, after attacking the government, Shahbaz Sharif, suggested negotiating a ‘charter of economy’ — a broad consensus among political parties on critical economic challenges.
But even as PTI leaders said they were willing to sit down with the opposition in order to reach a consensus on economic issues, the bubble was burst quickly and publicly by divisions revealed within the PML-N itself. And on Wednesday, while an all parties' conference debated a joint strategy to bring the government down, the PTI demonstrated its parliamentary strength and got its major budget proposals passed.
The opposition parties do sense an opportunity caused by inflation and the economic slump to mobilize people and bring them to the streets but to what extent they succeed in pinning the blame of the economic crisis on the PTI remains to be seen. The political battle has been drawn around this simple point: Who is responsible for the current economic position? The side who wins this argument will define the political fortunes in the coming months and years.
— Rasul Bakhsh Rais is Professor of Political Science in the Department of Humanities and Social Sciences, LUMS, Lahore. His latest book is “Islam, Ethnicity and Power Politics: Constructing Pakistan’s National Identity” (Oxford University Press, 2017).