Some of the permanent features of Pakistan’s annual budgets are deficit financing, the small size of the budgetary pie, heavy taxes on those already in the tax net and a large population out of the tax net (currently there are only 2.178 million active taxpayers in Pakistan which represents 3 percent of the 72.3 million-strong labour force), competing demands by defence, interest payment and development expenditures and an increase in the salaries of public employees. All this is expressed in a technical jargon.

Governments invariably do heavy chest-thumping about giving the best budget under tight constraints and the opposition always disagrees and “rejects” the budget. Yet another pattern in the budget season in recent years is the increasing frequency of the ugly scenes of hooliganism and mayhem, which took an even uglier turn this year with budget documents used as rockets against rivals on the floor of the National Assembly.

In all the budget-making exercises, something conspicuous by its absence is any serious effort to achieve long-term objectives that go beyond the term of the incumbent regime. In other words a lack of bipartisan policies is the bane of Pakistan’s political culture. This year was no exception because urgent concerns, rather than long-term goals, drove the budgetary allocations.

After three years of an economic meltdown, the PTI government sees this budget as a tipping point. If things go awry this year, the current regime is all but doomed in the next general elections. So this budget is, in essence, subservient to the political exigencies.

It is no rocket science to understand that Pakistan is in an economic quagmire because of the quality of its socio-economic structures. Some of the hallmarks of Pakistan’s economy are that it is a largely agrarian society with obsolete farming practices. The dreaded ‘mafia’ of middlemen, commission agents, industrial conglomerates, and business cartels routinely hurts the interests of the small farmers by manipulating the market prices of agricultural products.

In addition, a majority of the workforce is semi-skilled or unskilled. The majority is either illiterate or has low levels of educational achievement. If one factors in the low productivity of even skilled workers, many unethical business practices in the private sector, and widespread inefficiencies in the public sector, one can conclude that Pakistan can tap only a minuscule part of its economic potential.

Other perennial issues that dog Pakistan’s economy include tax evasion in connivance with public officials and the government’s misappropriation of public money that must be treated as a trust. Add to this the cost of incompetence. Just before assuming the role of finance minister, Shaukat Tarin told a TV anchor that thanks to the PTI government’s economic blunders, tax revenue collection was at its lowest level in 20 years. With the average GDP growth rate hovering around 1.8 percent, the last three years were the bleakest in Pakistan’s economic history.

Then there is growing economic inequality. The poorest 1 percent of population holds only 0.15 percent of national income, while the richest 1 percent holds 9 percent of the national income. The quality of public health is very poor. Pakistan has one of the highest child mortality rates in the world (67.2 deaths per 1,000 live births), and one of the highest nutritional inequalities in the world (nearly 50 percent of all children in Pakistan are chronically malnourished). In addition, Pakistan is fast becoming an environmental nightmare.

One of the warning signs that nobody can afford to miss is that Lahore is now one of the most polluted metropolitan areas in the world. According to a recent estimate, air quality in Lahore is rated as “unhealthy” with PM2.5 concentration in Lahore air currently five times above the WHO exposure recommendation.

The government must realise that a large number of cars brought on to the already choked roads will spell a greater environmental disaster. It should have considered making the public transport system more viable.

Let’s see how the current budget addresses the structural problems of Pakistan’s economy. First, the government took a laudable step to help the poor people’s economy jumpstart by promising them Rs 500,000 worth of interest-free loans. However, how the government plans to execute this plan is less obvious.

There are roughly 32 million households in Pakistan. Ironically, the recently launched Economic Survey 2020-2021 does not have the official poverty and unemployment figures, even though the recent estimates of the number of donkeys in Pakistan are recorded. Historical figures suggest that the share of poor people in Pakistan was 31.3 percnt in 2018, which may be around 40 percent in 2020, and quite understandably so because Pakistan’s economy was bludgeoned under the combined weight of the pandemic and inefficiency.

So, to give an interest-free loan of up to Rs 500,000 to the 40 percent of the households will require Rs 6.4 trillion (76 percent of the current budget size). Given the sheer implausibility of the good-heartedness of the government, this poverty alleviation measure seems to come straight from the murky recesses of Alice’s Adventures in Wonderland. This is populism, pure and simple.

According to one estimate, 39 percent of Pakistan’s population is engaged in the agriculture sector. The average farm size in Pakistan is 5.6 acres. However, the devil lies in the details. Only 2 percent of farm households control 45 percent of the farmland. Around 25 percent of the farmland is tilled by either landless tenants or faming owners.

It is evident that Pakistan’s food security crucially depends on the efforts of the 98 percent small farmers. However, inefficient and antiquated farming practices, high irrigation cost, climatic variability, and manipulation of the market prices at the time of harvest make farming a barely profitable proposition for most small farming-landholders.

A majority of such farmers borrow the inputs, such as seeds, fertilisers, insecticides at above the market rate from the commission shops and are under contractual obligation to sell their yield to the local commission agent. As small farmers are not “bankable” because they don’t have any collateral for loans, they end up raising funds from the informal sector at exploitative interest rates, which may be as high as 40-50 percent. Budgets over successive years have done little to alleviate the plight of such small landholders.

According to one estimate, around 16 percent of Pakistan’s labour force is semi-skilled. The share of unskilled labourers in the total labour force is around 50 percent. In a world that is fast converting into a knowledge economy with digitisation being at the heart of the modern economy, what value addition should be expected from the unskilled or semi-skilled individuals? Remittances from the unskilled and semi-skilled migrants are only a fraction of what a highly skilled immigrant labour force can generate.

Therefore, a significant budgetary allocation should be made to improve this group’s skill set, and bilateral and multilateral trade linkages should be leveraged to market the skills of Pakistan’s immigrants more profitably in foreign lands.

An increase in the salaries and pensions of the serving and retired public sector employees represent a large share of the government’s non-development expenditures. As inflation erodes the real worth of the income, a regular increase in pay and pension is warranted. However, linking pay and pension with inflation may not be sustainable in the long run. An increase in the salaries, as well as the increments and promotions of public sector employees, must be linked to their performance.

Governments need to carefully set the targets and objectives in each financial year, and budgetary allocation should be made subject to the achievement of those targets. Missing the targets must be penalised.

As an illustration, given the poor environmental quality in Pakistan, the ministry of climate change and related departments must be given the target of bringing a given percentage of Pakistan’s landmass under forest cover every year.

The increments in the salaries and annual increases in the salaries and promotions should be closely linked to the achievement of the targets. This should be reflected in the budgetary allocations in successive years. The mammoth backlog of court cases can be reduced using a similar approach. This will not only improve the quality of public service but also pay environmental dividends in the long run.

A reduction in prices of small cars may win the government some popularity in the short run. But the government should realise that a large number of cars brought on to the already choked and congested roads will spell an environmental disaster. It should have taken a longer-term view instead and considered making the public transport system more viable. Better still, the government should have incentivised a shift to bicycles. That would have been eco-friendly and drastically cut down health bills besides. But this requires transcending narrow political interests.

Is the political leadership ready to transcend parochial interests in favour of economic and environmental sustainability?

Dr Rafi Amir-ud-Din is an assistant professor in the Department of Economics at COMSATS University   Islamabad, Lahore Campus