The new $50 billion budget presented by Pakistan is coming under increased scrutiny, as experts point at a Chinese footprint (CPEC) and accuse the Pakistani government of brainwashing its people ahead of the general election. But how much of the harsh criticism directed at the new Pakistan budget is actually true? Let’s get the facts straight.
The new budget, which was presented by Finance Minister Ishaq Dar on May 26, is a development-heavy budget that is also aimed at boosting the country’s military spending at the time of the volatile Kashmir crisis with India.
The government of Prime Minister Nawaz Sharif is likely increasing the country’s defense spending by 7% due to the growing need to safeguard China-Pakistan Economic Corridor (CPEC) projects and be better prepared to fend off any potential military threat from India. However, critics accuse the government of sugarcoating the budget ahead of the national elections.
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For fiscal 2017/18, Pakistan is setting its military budget at $9 billion, compared to $8.4 last year. By contrast, Pakistan’s biggest enemy India unveiled its own new budget in February with defense spending standing at more than $50 billion, according to the Institute for Defense Studies and Analyses.
As much as $20 billion of the budget’s $50 billion will go toward development, $1.8 billion of which is set to finance CPEC projects. An op-ed published by DAWN suggests that there is a “Chinese footprint” on the Pakistani budget. As such, one can argue that the Chinese would allocate more money to CPEC projects if they were so keen on pushing forward the projects that matter to their national interests and not caring about Pakistan and its economic well-being whatsoever.
Will Pakistan really be “one of the largest economies by 2020”?
Even though the new Pakistan budget is up against a giant avalanche of skepticism and criticism, Sharif’s government has logged quite a few achievements. Let’s review some of the most prominent ones.
Many critics accuse the government of using the new budget as a means to woo voters before elections. However, it’s tough to say that any of the following achievements could have been made overnight and only for the sole purpose of winning the next election. With Pakistan’s economy crossing the $300 billion mark for the first time in history earlier this month, the country’s GDP growth rate was driven to 5.28%, which is the first time it has breached the 5% mark in 10 years.
The International Monetary Fund projects Pakistan’s GDP growth rate at around 6% in the next fiscal year thanks to CPEC being in motion. With foreign reserves standing at $21 billion, tax collection has grown 81% in the past four years. With nearly all of Pakistan’s economy sectors continuing to soar, the industrial sector has risen 9% in the current fiscal year, while the services sector has increased by 5.9%. Other sectors, such as livestock, forestry and fishing, have been also on the rise with growth rates of 3.43%, 14.49% and 1.23%, respectively.
Most notably, per capita income jumped 22% to $1,631 during the current fiscal year. When presenting the budget on Friday, the finance minister had a very ambitious prediction for Pakistan.
Declaring that Pakistan would be “one of the largest economies by 2020,” Muhammad Ishaq Dar said, “[The] world’s credible institutions are predicting that Pakistan would join the G-20 by 2030.”
Dar does tell the truth when he says international ratings agencies are predicting a bright future for Pakistan, as agencies like Standard & Poor’s, Moody’s and Fitch unanimously have raised their positive ratings for Pakistan over the last few months. In fact, the Pakistan Stock Exchange has performed the best in Asia and the fifth in the world in the current fiscal year. U.S.-based Morgan Stanley Capital International (MSCI) reclassified Pakistan as an emerging market, with the economy expected to generate inflows of investments in the range of $200 million to $500 million.
Is the Pakistani budget really that bad?
A report penned by Geo News seems to be bashing Pakistan’s new budget from all sides with a wooden stick. One could argue, however, that the criticisms are far-fetched. Pretty much all of the points are bashing the Pakistani government for not increasing enough spending on various sectors, though it does acknowledge the fact that the increases have been made, even nearly double increases in some cases.
One of the most prominent examples is Geo’s mud slinging for not increasing Pakistan’s health expenditures fourfold even though this year the government has increased health expenditures by nearly two times, from Rs. 29 billion to Rs. 49 billion.
For a country that is only beginning to soak up all the benefits from incoming foreign investments and is only beginning to enter the world as an emerging market, increasing expenditures by two times in any of the sectors already deserves praise. And in the case of CPEC, a whopping $150 billion in foreign investments is expected to flow into Pakistan in the coming years, according to last year’s summit of top government leaders and investors
Geo News also lashes out at the new budget saying that the 10% increase in the salaries of officers and men in the armed forces is not enough to “acknowledge their courage, commitment and sacrifices” for Pakistan. It also says the salaries should have been increased by at least 50% instead of 10%. While this idea is correct for all the right reasons, once again, let’s not forget that the country is only beginning to rise from its knees and is projected for tremendous economic growth thanks to CPEC projects with China.
Budget 2017/18: Is Nawaz wooing voters ahead of the election?
Skeptics are also criticizing the new budget for seemingly sugarcoating numbers only to woo voters ahead of the national election. Nawaz’s public approval ratings remain very high (75%), according to opinion polls conducted in late 2015. While no new polls have been carried out in the past one-and-a-half years, there seems to be a consensus among Pakistanis that Nawaz is “the only viable option for Pakistan.”
So saying that the budget was overblown only to woo voters before the election is rather questionable.