Budget preparations are underway in the federal capital with major stakeholders putting in their requests for next year’s allocations (current and development expenditure) while the private sector players are proactively engaging with the Federal Board of Revenue (FBR) through associations that best represent them — be they sector specific like all Pakistan Textile Mills Association or as member of a Chamber of Commerce — and, as is the norm, are seeking fiscal and monetary incentives — lower taxes, and a further reduction in the discount rate (11 percent as of 5 May 2025) to enable them to compete with regional countries.

The needs of some stakeholders, recipients of allocations, are rightly considered more paramount than that of others. But what is unconscionable is raising salaries by 20 to 25 percent in the current year at a time when the economy was extremely fragile, a state of fragility that continues to this day in spite of protestations to the contrary by members of the cabinet whose salaries/emoluments were also recently upgraded.

The fragility is reflected by: (i) rollovers of 16 billion dollars while the Governor State Bank of Pakistan (SBP) claimed that total foreign exchange reserves by the end of June this year would be only 14 billion dollars with net foreign inflows in the negative; (ii) Large scale manufacturing sector (LSM) remains in the negative territory implying that growth is not private sector led; (iii) agriculture growth may have to be downgraded if the Indus Water Treaty is not resuscitated; (iv) an unprecedented rise in remittances was attributed to the SBP buying dollars on the open market and crediting it to remittances, as per independent economists — a charge that SBP has not yet denied. The massive decline in remittances in the following month proves the veracity of this charge; and (v) trade deficit is on the rise again on the back of higher growth fuelled by higher exports heavily dependent on raw material imports.

Administration after administration has ignored the well-established truism that a fragile economy does not, nay cannot, attract foreign investment (for setting up units with private sector participation or purchase of a state owned entity). And typically, the capacity of an economy to attract foreign investment requires an investment........

© Business Recorder