A bluff is “an attempt to deceive someone into believing that they can or will do something”. A policy is a “course of action or principle of action adopted or proposed by an organization or an individual”. In the “card game of poker, a bluff is a bet or raise made with a hand that is not considered the best hand.” To bluff is to make such a bet. The objective of a bluff is to induce a fold by at least one opponent who has a better hand.
Bluff number 1: Budget 2021-22 – Tax revenue (FBR) of Rs 5.829 billion. According to the RBF, it collected 4.7 trillion rupees in the outgoing fiscal year. Will the RBF be able to collect 24% more next year, especially when the finance ministry claims that there will be “no new taxes”? For the record, the RBF would need to collect a colossal Rs 1.100 billion more than last year in order to achieve the new goal. Is there a policy, line of conduct or principle of action that has been adopted or proposed by the Department of Finance to achieve the new goal? Is the Ministry of Finance bluffing? Are we trying to cheat on someone other than ourselves?
Bluff number 2: Budget 2021-22 – Provincial surplus estimated at 570 billion rupees. The budget provides that the budgets of the four federating units will have a surplus of Rs570 billion. Here is the balance sheet: Punjab’s surplus budget of 125 billion rupees; Sindh’s deficit budget of Rs25 billion; Khyber Pakhtunkhwa’s balanced budget; and Balochistan’s deficit budget of Rs 84 billion. This translates into an accumulated surplus of Rs16 billion as opposed to a surplus of Rs570 billion in the federal budget. Is the Ministry of Finance bluffing? Are we trying to cheat on someone other than ourselves?
Bluff number 3: Budget 2021-22 – Privatization proceeds of Rs252 billion. The Ministry of Privatization, as part of its “Active Privatization Program”, has the following entities at the top: Balloki Power Plant, Haveli Bahadur Power Plant, SME Bank Limited, First Women Bank and Services International Hotel. Which of them will actually be privatized in the next 12 months? Where are we going to get Rs252 billion from? Have we really adopted or proposed a policy, a course of action or a principle of action? Is the Ministry of Finance bluffing? Are we trying to cheat on someone other than ourselves?
The three bluffs above would mean a much higher budget deficit than indicated in the 2021-2022 budget – about a trillion higher. Worryingly, the trade deficit for fiscal 21 reached $ 31 billion from $ 23 billion last year. According to the economic literature, “the budget deficit has a negative and statistically significant effect on the current account balance”.
There are three serious concerns: the budget deficit, the circular debt, and the trade deficit. Can we really bring down the growing circular debt without increasing the tariff? Magic? Does the finance ministry bluff on all three? Do we really have a policy, course of action, or principle of action to address any of the three? The exponential increase in the trade deficit will sooner or later turn into a currency crisis, as it always has. How far are we from twin deficits – and back to the IMF? What will the new IMF program look like?
The writer is an Islamabad-based columnist.
E-mail: [email protected] Twitter: @saleemfarrukh