The budget passed without any hiccups as expected reflecting a high degree of confluence of parliamentary opinion that included party (Pakistan Muslim League-Nawaz) loyalists, those not part of government but part of the system by dint of being allowed to occupy constitutional positions (Pakistan Peoples’ Party) and, of course, the beleaguered opposition focused on release of their party leadership from jail rather than the plight of their constituents that they purport to represent.

Parliamentarians have typically focused on two major aspects of the budget and sadly this principle, enshrined in their psyche, continued to prevail in the current year.

First, there was little if any debate on the expenditure side of the budget with no mention of the projected decline in current expenditure based on the expectation of a discount rate decline – a decision that clearly is no longer within the domain of the Finance Ministry, not because the State Bank of Pakistan (SBP) and its Governor who heads the Monetary Policy Committee is no longer susceptible to government pressure, but because the International Monetary Fund (IMF) is unlikely to extend approval for a rate decline until and unless supported by concomitant macroeconomic indicators. It is critical therefore to determine the likelihood of a discount rate cut.

Simply defined it is rate of return used to discount future cash flows back to their present value, indicative of the rate of inflation, and accounting for both the opportunity cost of capital and uncertainty of those future flows (uncertainty is likely to continue as domestic investment climate remains under stress and China reportedly decided to roll over 1.8 billion dollar loans but not the concessional loans, preferential buyer........

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