KARACHI, May 24: The recent monetary package announced by the State Bank of Pakistan may force budget-makers to look again at their proposed fiscal measures for the next budget so as to bring them in line with the spirit of the money-tightening measures of the central bank.

“We are doing our job of framing revenue proposals,” a well-placed source in the Federal Board of Revenue told Dawn on Saturday by telephone.

“But the real outlines of the budget are being drawn up by the finance ministry, in consultation with relevant ministries and agencies,” the source said, hinting that the real budget was revenue expenditure which in the current fiscal year had exceeded all projections.

The next budget’s revenue expenditure estimates are being drawn up when international oil prices are showing no signs of stability, the domestic market is hit hard by all-time high inflation, the supply side of food grains is vulnerable because of a weak and corrupt administration that is proving ineffective to prevent smuggling and the SBP has restricted capacity of banks to give credits and has slapped a 35 per cent cash margin on imports because even non-oil and non-food imports have risen by 46 per cent in the last nine months.

What are the options available to budget-makers? A corporate leader with stakes in financial and automobile sector wondered as to how production tempo would be maintained and investment would be attracted when bank credit has been made expensive.

SBP Governor Dr Shamshad Akhtar’s “announcement has sent negative signals about the governance capacity of the government, inability of the central bank to contain inflation and keep rupee exchange value stable,” he said. He feared that there may be more capital outflow in the coming days.

“Forcing banks to pay a minimum of five per cent interest to saving account holders amounts to tinkering with the autonomy of the financial institutions,” he said.

“Investors are bound to become more apprehensive of government’s intentions,” he said.

Corporate leaders, politicians and economists wonder as to how budget-makers would be doing their job when international and domestic environment is most inhospitable.

As one of them pointed out, the budget-makers are trying to work out a balance between the demand for relief for the poor and unemployed and also of the mighty huge and bulging establishment in uniform and without and also to squeeze out some resources to carry out development of social and physical infra-structure.

“All this has to be done within very limited resources and ensuring that there is much monetary expansion,” remarked an economist consultant.

“At the root of all our problems, spelt out by the SBP governor, is perpetual political uncertainty in the country,” remarked Senator Prof Khurshid Ahmad of Jamaat-i-Islami. He attributed all economic and social ills, flight of capital, unstable rupee and mounting current expenditure that have led to massive borrowing by the government from the central bank and an all pervading corruption to “unending political uncertainty.”

He proposed harsh political decisions to bring a stable political structure in the country, supremacy of parliament and restoration of a judiciary spelt out in the Constitution.

“The government borrowed Rs550 billion from the central bank till May 19,” former federal commerce minister Humayun Akhtar Khan told Dawn from Lahore by telephone.

“Never before any government borrowed so heavily from the State Bank as it happened in 2007-08,” he said.

The former minister said that government borrowing should not be more than 1.5pc of GDP and that it should explore other avenues.

He said the food grain supply has to be ensured at affordable prices for consumers which is essentially a governance issue.

Reports suggest that there was already a conflict of views on the economic growth projection of 6.5 per cent by the Planning Commission. The finance ministry has questioned this growth projection.

Within the PPP ranks and many corporate leaders and businessmen recall, Mr Salman Farooqi’s services as a “great doer for Asif Ali Zardari, Nawaz Sharif and Jam Sadiq Ali in the past” but they doubt whether he would prove to be a good planner.