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Although it has already been tirelessly analyzed by pundits across the political and economic spheres, the best way to characterize the underlying message of the Budget 2021-22 is that Pakistan is “back on its feet.” This can be seen through many of the various line items that together comprise the budget’s financial statements, but it is seen above all in how the moving parts are being reworked for stimulating growth rather than pushing financial consolidation. Pakistan’s spirited political landscape has led to polarizing opinions about this growth-orientation in a challenging domestic and international climate, where the opposition has raised considerable hue-and-cry about fiscal sustainability and rampant inflation, while the government has blamed the opposition’s mismanagement during previous administrations for forcing it to fix their problems before launching a budget that was truly its own. 

Both have some truth in their arguments, and the government’s budgetary attitude reflects a pent-up frustration dealing with economic constraints, a debilitating pandemic (which is nevertheless managed very well), and IMF-imposed austerity. For two budget periods now, the government was forced into a firefighting mode, as with the pandemic, regional security issues (e.g. India’s illegal annexation and division of IIOJK, or the India-Pakistan standoff of early 2019), as well as domestic economic challenges of both a cyclical and structural nature. The government now wants to spread its wings a bit and address the longer-term ambitions that it had set out before coming into office, including: population welfare, social protections, sustainability, and income inequality. These are elements of realizing an Islamic Welfare State paradigm, in which pro-poor policies and structures of social protection drive socioeconomic participation and stability. 

Yet while the government is signalling that the country is back on its feet, it is still an open question whether we are really out of the woods. The country is still in an IMF program, it still has to vaccinate the majority of the population, it has still not gotten complete reprieve from the FATF, it still faces budgetary deficits, and the vast majority of people who should be paying direct taxes underpay or do not pay at all. The budget does not deviate significantly from earlier ones in terms of reliance on indirect taxation, cumbersome tax distortions, and a complex regime of exemptions; not to mention the foreign-borrowing element that compromises longer-term sovereignty. The government’s message is that these should not be causes for constraint but for an expansive policy approach to the economy. 

But an expansive approach must not gloss over the hard work of reforming an off-kilter and imbalanced economic architecture. There are structural issues including a low tax effort, rampant multi-sector corruption, commodity mafias, and rule-of-law issues that bear down on the economy in a longstanding manner. This is where the FATF and IMF also see continued issues in Pakistan’s economy, and rightly so, since they require more political will and reconciliation of competing domestic interests than economic tweaks per se. They are not a function of removing a withholding tax here or adding an exemption there. 

Insofar as the budget offers a signal that things are getting better, one must still watch for the adverse risks that loom over the horizon and into the later part of FY2021-22. The security situation in Afghanistan and the risk of a refugee crisis, or of India seeking to divert public attention from its government’s failures by stirring up something with Pakistan, or indeed something as frightening as contagion of the India-variant of Covid, these are all downward security risks to realizing the ambitions embedded within the current budget. The larger nexus between economy and security should not be lost in the litany of variant line items regarding exemptions, subsidies, and credits. This means that Pakistan will need to continue to invest in its defence requirements, as well as its disaster preparedness, even as the ordinary person’s worldview (and their political persuasion) shall remain circumscribed by the price of Atta and Ghee.

Pakistan has overcome great adversity in only the past three years, and this does allow for some breathing room, as is reflected in the stimulus element of the budget. The recent surge in the stock market reflected in part the expectation of governmental relief measures, as well as a higher than expected GDP figure. However, insofar as the headwinds of the past few years were exogenous (a virus, hybrid warfare, global economic slowdown, aggressive neighbors), the tailwinds were largely exogenous as well. For example, remittances remained strong, the US dollar devalued, exporters gained against competitor countries, and the largest economies (US, China) have bounced back. Yet the question of whether we are really back on our feet, as the attitude of the budget implies, is one that requires further introspection. 

Until the larger sociopolitical factors constraining Pakistan’s potential are not addressed, and its economy is understood by citizens as a national security issue (thus complying with national rather than individual interests), we will only be deploying our budgetary resources at the margins of our national potential. 

The writer is the Director for Economics and National Affairs at the Centre for Aerospace & Security Studies (CASS). He can be reached at

Image source : Barns-Graham, William. “Post-Brexit Bounceback for Exports Continues as Optimism Grows over UK’s Economic Recovery,” Institute of Export & International Trade, 13 May 2021, Accessed 20 June 2021.

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