Imran Khan government has leverage to contain inflation but flaws in its economic policies

Islamabad [Pakistan], February 16 (ANI): The Imran Khan government has considerable leverage to adjust policies that can contain inflation and reduce the yawning gap on the fiscal side, which is also a contributor to inflation but it is simply not engaging in even as rise in administered prices of utilities and petroleum levy may be dictated by external factors, according to a media report.
It said the basic flaw in the government's economic policies to date has been three-fold.
"First, the inordinate rise in current expenditure - from 4.3 trillion Pakistani rupees in 2017-18 to over 7.5 trillion Pakistani rupees budgeted for the current year. The government as per the Fund report (IMF) has pledged to limit the increase in spending to 1.1 per cent of GDP above the FY 2021 out-turn through rationalizing non-priority current spending and streamlining non-targeted subsidies and recalibrating investment spending in line with realistic execution rates," reported Business Recorder.
"Second, within current expenditure, there has been a massive rise in markup costs reflecting an unprecedented rise in both domestic (from 16.5 trillion rupees inherited by this government to over 27 trillion rupees today) and foreign borrowing (from 95 billion dollars to over 130 billion dollars today). Borrowing to meet current expenditure which is not backed by a rise in output is also highly inflationary," the report said.
It said that instead of cutting its government's own current expenditure the focus remains on raising revenue -- through tax collections (while retaining the heavy reliance on indirect taxes accounting for over 62 per cent of total collections in the current year, whose incidence on the poor is greater than on the rich) and privatisation for which the environment is simply not conducive at present.
According to Business Recorder, envisaged subsidies including for three staples, would cost an unbudgeted 120 billion rupees, with the jury still out on whether launching cheap credit for the poor and vulnerable (including housing) and for small and medium enterprises would fuel growth or fail as in the past. (ANI)