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Thursday, July 29, 2021

Budget 2021 : In the hope We are able to swim

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In last few months, Pakistan’s economy has shown upward growth. Many macro economic indicators showed positive trends, Stock Exchange hit the highest level of history. Besides Budget 2021 brought happiness on many faces. However Pakistan needs a sustainable economic strategy that will bear far reaching impact on economic growth. Here are few of suggestions.

For nest year:
Increase in oil prices – Government needs to maximize petroleum levy, with current oil prices 4-5 B Rs is being collected while Pakistan targets to reach to 690 B Rs in petroleum levy by nest year. Hence increasing petroleum levy will help.

Inflation : Government can not afford subsidizing everything, keeping in view the global price hikes Inflation is expected to rise, with increased oil prices inflation will also be effected in upward way.

Dollar Exchange Rate is expected to increase, based on factors including Current Account Balance in coming months due to high trade balance (commodities). Dollar exchange rate will be effected by the massive Debt Reservicing required in this Fiscal Year, that makes situation more complicated.

When State Bank of Pakistan requires to keep inflation under control by attracting more Federal Direct Investments. Thus interest rate is expected to tweak this year. An estimated 7 % Interest Rate would result in ending recent wave of Optimism among business communities bringing direct impacts on businesses downwards. Sadly there is no option available.

With an already angry Business community it will be impossible for Government to achieve or show substantial increase in Tax Collection. Formalizing the sectors will not be an easy task for Government and Traders will turn anti Government and will start whining about policies, same will be the case with Stock markets in the first quarter. Media Hysteria will start about failed policies and a new wave of inflation. All segments praising recent policies of Government recently will indeed be indeed criticizing it.

With devaluation of currency profitability of Exporters will get better but their whining will increase . With increase in PKR related external debts, inflation is expected to be raised in Agriculture sector. With resumption of normal flights from Q2 2022 – a reduction in remittances as 10,000 US $ can be physically carried via flights. The impact will be huge, But question arises; how will Government react when they planned 31B $ remittance?

What measures are being taken for upcoming challenges and what are conclusive policies designed by the Government to tackle hurdles including

  • Government’s effort to ensure foreign remittances touch 30B$.
  • Whining Traders over inflation
  • Media handling over inflation and devolution of Pakistani Rupee.
  • Increasing Tax Base, while several informal sectors have already been affected by Covid -19.
  • Upcoming Global Challenges will make Prime Minister dubious about recent budget 2021.

    But many Experts say
    ” let the things take its course now is the time for ghabrana nahi hai”. However Pakistan would need to believe in the core intentions even if it requires delay in spending’s.

It is not an easy task, Prime Minister Imran Khan will be under more pressure with upcoming Elections. To avoid this panic from all quarters, I am sure Prime Minister besides his economic team believe in fundamental strategy – he also recognizes the importance of sustainability in policies.

Otherwise all Pro Budget Segments will not be able to defend when wave of inflation hit general masses, when Pakistani Rupee’s devaluation occurs , when interest rates are changed – every single segment will take a famous UTURN in supporting Government. The pessimist in me thinks this is a big big risk but Its high time to swim through or sink.

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Omer Azamhttp://www.pak-times.com
Omer Azam is Social Media Marketer, very active on propeller; he is very much interested in International Politics.
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