Who’s afraid of the Budget?

Is it the government?

If the budget is to be strategic, as the finance minister says, and if it has to reflect the leadership’s resolve, as the prime minister says, and if it has to fuel structural reforms, as the entire cabinet says, then today’s budget will need to show the kind of courage that no previous budget has shown.

For this to happen, the government will need to be fearless.

Here’s the problem, though. The fear of being fearless haunts the budget makers more than it should. It is a fear triggered by the demands of assorted lobbies, pressure groups and political gravy trains. Only a fearless government can resist such pressure, defy such demands, and barrel ahead with reforms that Pakistan so desperately needs.

These needs are well known. On the revenue side, broadening the tax net and privatising state-owned enterprises remain key challenges. On the expenditure side, reducing the size of the government and reforming the pension system top the priority list among various other items. Not much can be done with interest payments, or revenue share of the provinces, or the defence budget. So, within these constraints, the government has to show courage and do what previous governments have feared to do.

The base is set. While launching the Economic Survey on Monday, Finance Minister Mohammad Aurangzeb talked about the macroeconomic improvements from last year. He is not wrong. Inflation and interest rates have come down impressively while foreign exchange reserves and stock markets have risen significantly. As has consumer confidence, if latest surveys are to be believed. The exchange rate has held steady, and the IMF programme is on track. Credit must be given where credit is due.

Clarity of policy played a role, IMF’s requirements played a role, and fiscal discipline played a role. Courage though was not the main ingredient. Now it will need to be. The government will need courage to tax those powerful sectors and lobbies that remain outside the net; it will need courage to right-size the federal government in face of stiff resistance from political and bureaucratic vested interests, and it will need courage to push through reforms in the power sector. So far, we have not seen a display of such courage from this government.

Neither have we seen any serious conversations between the federation and the provinces on the National Finance Commission Award. The finance minister mentioned during Monday’s press conference that such a discussion might take place in the next few months. Good. But why was this not done earlier? Lack of resolve?

Speaking of resolve, much will be needed if the policy of export-led growth has to deliver dividends. The finance minister has been making the right noises about not falling prey to the boom-and-bust cycles of yesteryears in a rush for growth. But export-led growth will require the government to actually promote and incentivise exports, not tax them like it does presently. This would also require innovation and dynamism to help the private sector move on to value added exports.

So far, the government has opted for shortcuts to get macro numbers in order. It has taxed the already over-burdened salaried class, shied away from major government right-sizing, kicked the privatization can down the road and vocalized power sector reforms instead of implementing them. The time for such shortcuts is now over. The business-as-usual type of budget will not cut it anymore. Neither will high sounding claims meant for political consumption. If the finance minister’s budget speech today does not have real substance for real reform, it will betray the government’s inability to muster the courage required at this time.

More so because few governments have had the open field to drive through reform than this one. The civil-military equation is at its supportive best, the state is fresh off a morale-boosting victory over India, the opposition is in tatters and international financial institutions – as well as major regional and global powers – are lending a hand (and dollars) wherever needed. There is never a better time to display courage, resolve and determination to cut through all pressures, lobbies and vested interests.

Today’s budget is a test-case to see if this government – with all the advantages that it enjoys – can walk the talk. There is a broad consensus that continuity of policy can breed good economic dividends. This means staying the course and not being distracted by political compulsions or expediencies.

The present system faces no risk to its longevity for now. This is a luxury few have had in previous terms. It would be unfortunate if at this critical juncture the government wastes the opportunity to reform the system with courage and conviction. We will not have to wait long to deliver the verdict.

Copyright Business Recorder, 2025