The government’s attempt to expedite the IMF’s final condition before signing the Staff-Level Agreement seems to have hit a major stumbling block. After the President’s refusal to facilitate the mini-budget through an ordinance, the only option was to get this passed through parliament. But the government’s changes to taxation mechanisms have not been received well, by the general public or within the National Assembly.
With the session adjourned on Friday, the finalisation of the SLA has now been inevitably postponed till after the NA passes the bill for the changes in the budget on Monday. The only problem is that with our foreign exchange reserves quickly dwindling, any delay costs Pakistan and the economic outlook. It is clear that the Finance Ministry could have helped matters by choosing to take a less regressive path in taxation reforms. The blanket increase in the general sales tax is a lazy way to increase revenue and while it works, it tends to hit the poorest segments of society the hardest.
There is no way to sugarcoat this, time after time, the Finance Ministry under FM Ishaq Dar tends to safeguard the interests of the rich while inflation and the policy impact of all these changes are felt by those that cannot afford it.
The government will now have the difficult job of convincing its allies in parliament of agreeing to the changes because it is expected there will not be enough time to recommend and implement any substantive changes in the mini budget. It is hoped that there are no more delays beyond Monday however, as with each passing day, Pakistan’s outflow commitments continue to pile up while inflows are virtually non-existent till the IMF programme is finally agreed to.
