In the last four fiscal years, the Consumer Price Index increased by half while the local currency depreciated against the greenback. While the economy, on average, grew by a mere 2.9 percent per annum - not much more than the population growth. The tax to GDP ratio has declined to 9.3 percent of GDP under the helm of the PPP-led government. Energy woes are felt by all. Not much needs to be said besides that the subsidies to this sector were Rs 768 billion in the past four years and our energy mix has titled more to imported expensive furnace oil, than ever before.
The government may defend this by shifting the onus on the previous regime which almost molested the economy in its last year by over running subsidies and not passing on the price burden of rising international oil prices to the masses. But this argument does not justify persistent double digit inflation and meager growth in taxes and economy. But the coming months are more worrisome as economists concur that FY13 may play out like a rerun of FY08. After all, this is an election year and the government appears ready and willing to do whatever it takes to vow voters.
Without delving more into this; let''s analyse what the economic management said and did in the last four years. In its first year the deficit overran the budgeted amount by 13 percent followed by 29 percent and 65 percent in the next two years; and in the ongoing year it may be close to double of initial estimates. What then would happen to the budgeted deficit of 4.7 percent in this election year, requires little brain storming. In the last election year, the deficit was as high as 7.6 percent of GDP.
The government''s plan this year includes raising resources by a quarter to Rs 2.7 trillion while restricting the growth of expenditures to a mere 3 percent to reach at Rs 3.2 trillion. FBR is doing what it is saying, to the least. The institution is confident it will meet its target of Rs 1952 billion this year and is targeting a realistic increase of 22 percent. The problem lies in the non-tax revenues, where the government has had no good luck in the 3G license auction or PTCL privatisation proceeds for two years running.
Sour relations with the US are not helping either; it is estimated to slip by a quarter from the target to Rs 512 billion. The government is too optimistic for non-tax revenues to grow by 42 percent in FY13. On development expenditure front in FY12, government for the first time in its tenure was able to spend more than what it envisaged and the it may well meet the optimistic target of Rs 591 billion (23% growth) in the election year.
The elephant in the room is financing the deficit. Just to give a trailer - government budgeted bank borrowing of Rs 304 billion in FY12 and its revised estimates are over three folds. The government has budgeted mere Rs 483 billion to be borrowed from banks in FY13.
This may keep the printing press of Pakistan busy which printed Rs 610 billion in last four years. Just to remind you, that in last election year of the previous regime, pictures of Mr Jinnah worth Rs 689 billion were printed. The impact of ''populist measures'' on monetary expansion appears to be a no-brainer at the moment, while the achievement of single-digit inflation in the new fiscal will indeed be a Herculean task.