Fiscal prudence, an ever pertinent concept in economics, becomes even more paramount when used for the government budgeting. However, the fiscal prudence in general is mostly trumped by populism, especially when the elections are nearing. The trend seems to have been reversed by the incumbent finance minister, Ishaq Dar. Two themes that can be highlighted in the new budget are stability and growth (at the macroeconomic level), and some relief for the lower strata without burdening the government’s expenditure.

The China Pakistan Economic Corridor (CPEC) provided the government a rare glimmer of hope to undertake a hefty raise due to the Foreign Direct Investments (FDI) in the allocations for large infrastructure projects, which in turn provided an ample window to reduce withholding tax on registration of cars to urban middle class, pay and pension increase, credit guarantee for small and medium businesses, tax relief to agro based industries, so on and so forth.

It can be assessed that the government has learnt its lesson; populist budgets may be appealing for a short time spectrum, nevertheless, it is the stability factor that bewitch a rational man and helps in maintaining the government. The government looks adamant in maintaining its economic prowess of the last four years intact.

The government is making a concentrated attempt at producing a sound balance between the growth and populism fervour.

A reading of the budget shows that the government is making a concentrated attempt at producing a sound balance between the growth and populism fervour. The PML-N government is trying to consolidate the gains made in the last four fiscal years, while not hampering its design of getting re-elected in the office. Its efforts include levying more tax on high growth sector like steel and cement, withdrawing tax incentives from builders, adding more burden on the non-filers of income tax return, taxing capital gains and dividends of listed firms.

The federal government categorically comprehends that it is walking on an extremely tight fiscal rope. Thereby, a smart move of not going all out for a popular budget, in the hindsight, leaves the job of offering goodies and freebies to provincial governments. However, as can be seen all is not in good faith for fiscal prudence, as the government officials are trying their level best to get the best possible deal for their voter base in Punjab. This has subsequently led to allocating hefty amounts of funds for gas, electricity and drinking water in the area, hoping for populist budget aura to accentuate their possibility of getting re-elected in the 2018 general elections.

In retrospect, Dar has inherited a capitulated economy on ventilators, which he termed as a “broken economy” in his first budget speech. As the term expires for the government, the health of its economy might not be ideal but is way better than when the government’s tenure started four years back. But all the positivity aside, two pertinent challenges would still remain that the government has not been able to resolve till date on a sustainable basis. The very first is the broadening of the tax base which is imperative for any economy to fulfil its current and capital expenditures, in the short, medium, and ultimately in the long run. Secondly, the bridging of current account deficit that is sending negative signals to foreign direct investors willing to inject in the country.

The health of its economy might not be ideal but is way better than when the government’s tenure started four years back.

The government’s policy of maintaining the exchange rate and allocating foreign debt to increase foreign exchange reserves is dismantling the current account. The manufacturing sector under unprecedented stress of falling exports, also insinuates that the current account has resumed bleeding under the ever growing trade deficit.

Another Achilles heel is the lack of institutionalisation, which if not handled amicably could force us in shambles. One can say with the appalling condition of the economy, there is still a long way to go for perpetual growth to actually have the desired trickledown effect on the masses.