A budget is the backbone of a country’s economic management, providing a comprehensive framework for allocating resources, prioritizing expenditures, and generating revenues. By establishing clear financial goals and objectives, a budget enables the government to make informed decisions about resource allocation, infrastructure development, and social programs. This, in turn, drives economic growth, reduces inequality, and improves citizens’ quality of life. A budget also promotes transparency and accountability, ensuring public funds are utilized efficiently and effectively. Furthermore, a well-crafted budget helps maintain fiscal discipline, reduces debt, and boosts investor confidence, creating a favorable business environment that fosters innovation, job creation, and economic prosperity. By prioritizing spending and revenues, a country can achieve its development goals, promote financial stability, and build a brighter future for its citizens but presenting a budget in Pakistan is always a daunting task, akin to navigating a treacherous political and economic minefield. The country’s fiscal landscape is marked by a precarious balance between rising expenditures and limited resources, making it a challenge to strike a balance between competing priorities. The budget process is often marred by intense political wrangling, with various interest groups and stakeholders vying for a larger share of the pie. Furthermore, the country’s economy is heavily reliant on foreign aid and loans, adding an extra layer of complexity to the budget-making process. Amidst these challenges, the government must also contend with soaring inflation, a widening trade deficit, and a burgeoning population, making the presentation of a viable and sustainable budget more and more complicated task. Like always the upcoming budget 2024-25 will also be a real challenge for the state as the citizens are expecting some relief from the newly elected government due to several promises they made during their election campaigns.
Expectations:
The citizens of Pakistan have high expectations from the Budget 2024-25, hoping for relief from the prevailing economic hardships. They expect the government to announce measures to control inflation, reduce taxes, and increase subsidies on essential items like food, healthcare, and education. People also hope for increased funding for public welfare programs, improvement in the healthcare system, and infrastructure development. Moreover, citizens expect the government to address the issue of unemployment and provide opportunities for youth empowerment. Furthermore, citizens expect the budget to prioritize education and healthcare sectors, allocating sufficient funds to improve the quality of services and increase accessibility. They also hope for measures to promote economic growth, encourage foreign investment, and support small and medium-sized enterprises (SMEs). Transparency and accountability in government spending are also expected, with citizens demanding a reduction in unnecessary expenditures and a focus on productive development projects. Overall, the citizens of Pakistan expect a people-friendly budget that addresses their pressing concerns and contributes to the country’s economic prosperity but in contrast, the upcoming budget is full of challenges for the new Government including the need to balance fiscal consolidation with economic growth, managing high inflation and interest rates, and implementing austerity measures without exacerbating poverty and inequality. The government must also navigate the impact of a depreciating rupee, high defense spending, and limited tax revenue, all while meeting the conditions of the International Monetary Fund’s (IMF) bailout package. Additionally, the budget must address the circular debt issue in the power sector and reduce subsidies without causing an undue burden on the masses. Overall, the budget presents a delicate balancing act for the government, requiring careful management to ensure economic stability and growth but Economic growth projections for 2024-25 will play a significant role in shaping the budget priorities. The government aims to achieve a sustainable growth rate to boost employment and reduce poverty where, challenges such as inflation, exchange rate fluctuations, and external debt will also demand interventions.
Challenges:
In Contrast, The Government of Pakistan faces significant challenges in preparing the Budget 2024-25. Managing fiscal deficits and controlling inflation are top priorities, as the country struggles with high debt levels and rising prices. Additionally, the government must broaden its tax base and increase revenue collection without overburdening existing taxpayers. The power sector’s circular debt and meeting the conditions of the International Monetary Fund (IMF) program add to the government’s woes. Political pressures from various stakeholders, including opposition parties and coalition partners, further complicate the budget-making process.
The government must also balance security spending with development expenditures, address the energy crisis, and allocate resources for social welfare programs. The slow pace of economic growth and the need to stimulate growth without compromising macroeconomic stability pose additional challenges. The government must make tough decisions to allocate limited resources effectively, prioritizing sectors that drive growth and improve the lives of citizens. The Budget 2024-25 will be a critical test of the government’s ability to manage these challenges and put Pakistan on a sustainable path to economic prosperity.
Recommended policies:
To stimulate economic growth and prosperity in Pakistan, the government should consider implementing policies that promote entrepreneurship, innovation, and foreign investment. This can be achieved by reducing bureaucratic hurdles, offering tax incentives, and investing in infrastructure development, such as special economic zones and technology parks. Additionally, the government should focus on human capital development by allocating resources to education and vocational training programs, enabling the workforce to acquire skills that match the demands of the modern economy.
Agriculture is the backbone of Pakistan’s economy, the government should prioritize initiatives that enhance agricultural productivity and value addition. This can be achieved by investing in irrigation systems, crop insurance programs, and research and development of high-yielding crop varieties. Furthermore, the government should encourage private sector investment in agriculture and provide subsidies for farmers to adopt modern farming techniques. This will not only increase agricultural output but also reduce post-harvest losses and enhance farmers’ incomes.
To address the pressing issue of poverty and inequality, the government should allocate resources to social protection programs, such as cash transfers to vulnerable segments of society, and invest in healthcare and education infrastructure. The government should also introduce progressive taxation policies, such as wealth tax and luxury tax, to reduce income inequality. Moreover, the government should promote tourism and cultural heritage by investing in infrastructure and marketing campaigns, which will not only generate foreign exchange earnings but also create jobs and stimulate local economies. In addition, it is suggested that the state should maintain the balance between Expenditures and revenues by ensuring public debt sustainability to prevent a debt crisis and maintain investor confidence.
To prevent social injustice Government must prioritize its social welfare programs, encourage export promotion, and import substitution policies, and focus on FDIs. During the complete budgeting process Government must remember the challenges of climate change adaptation and mitigation as it should be one of the most important aspects of budget planning. Investing in sustainable development projects, renewable energy, and green technologies will be crucial for environmental conservation as we are all aware of the fact that, balancing economic growth with environmental sustainability and climate resilience will require innovative policy approaches and investments. Furthermore, embracing digital transformation initiatives will be essential for enhancing productivity, innovation, and competitiveness. The budget is likely to focus on digital infrastructure, e-governance, and digital skills development to drive economic growth so, leveraging technology for service delivery, financial inclusion, and e-commerce will be critical for advancing the digital economy.
Hence, it is concluded that the Budget 2024-25 of Pakistan is a crucial document that outlines the government’s vision for the country’s economic future. With a delicate balance between fiscal consolidation and growth, the budget aims to address the pressing challenges of inflation, unemployment, and poverty. By prioritizing key sectors such as education, healthcare, and infrastructure development, the government hopes to stimulate economic growth, improve living standards, and create opportunities for all citizens. Successful implementation of the budget will depend on effective management of resources, political stability, and a commitment to transparency and accountability. If achieved, then the Budget may have the potential to be a transformative milestone in Pakistan’s journey towards economic prosperity and a brighter future for its people.
The author is MD IRP/ Faculty Department of H&SS, Bahria University Karachi.