Islamabad: Wedged in by International Monetary Fund (IMF) demands for fiscal austerity, Pakistan's unpopular civilian government has presented a budget that may fail to please both voters hit by tax hikes and investors wary about its optimistic economic forecasts.
Saturday's budget underscores how hard it will be for the government to appease frustrated Pakistanis hit by food inflation, unemployment and tax hikes seen as helping fuel an Islamist insurgency and discrediting civilian authorities.
The government's predictions for a lower budget deficit of 4 per cent of GDP may also be simply too ambitious, putting off hard decisions on spending and revenues for later, as well as almost guaranteeing a continued unpopular IMF bailout.
"To be honest, I think this government is surviving not so much because of its popularity but more so by default," said Rashid Rehman, editor of the Daily Times newspaper.
"The government's hands are tied and one must not forget, given the fact that we're in the IMF programme, that there is little fiscal space for the government to manoeuvre. It's in survival mode."
On the brink of default, Pakistan turned to the IMF in November 2008 for a $10.66 billion (Dh39.1558 billion) loan package to help put its economy back on track. It received the fifth tranche of $1.13 billion last month.
The budget raised taxes on sectors such as capital gains and slashed some subsidies on energy and food, while trying to provide some social relief for the roughly third of the 170 million population that lives in poverty.
