- Pakistan handed over to IMF to hide incompetence
The PTI has handed over all powers to the IMF to take fiscal decisions for the next 40 months. The present Budget underlines what happens to the people when the real budget-makers are not elected representatives.
The budget speech by Minister of State Hammad Azhar started with token measures of austerity on the part of the government, like Cabinet members foregoing 10 percent of their pay. The civil bureaucrats above Grade 20 and their equivalent in the armed forces not seeking a rise in pay for a year. The Government’s running expenses slashed to Rs 437 billion from Rs 460 billion and defence budget to be kept static at Rs1.15 trillion. The budget figures of the defence sector do not give the complete picture as these do not include Rs 260 billion pensions for retired soldiers, Rs 45 billion of security enhancement and undeclared allocations for major weapon procurements and the strategic programme. Debt repayment has become much more costly as a result of the rupee value going down.
Token measures were announced for the welfare of the people. The minimum wage was increased to Rs17,500. (Who will enforce it in private sector?) Funds were to be doled out to those living below the poverty line. But will this remove poverty?
Then came the serious business: the IMF’s pressure to make a qualitative jump in raising finances for whatever it takes . The budget fixed an ambitious revenue target of Rs5,500 billion. For this sales tax was extended to several new items like beverages, sugar, and other goods. More taxes on cement and steel and a fixed tax on bricks will have a negative impact on the construction industry which has already slackened its activity leaving, according to one estimate, 800,000 daily wagers jobless. Additional sales tax has been imposed on petroleum products. This will affect the price of every commodity that is brought to the market. It is a myth to claim that the poorer sections of society will not be affected by inflation. Rs 1.2 million was the legal limit for income tax exemption for those receiving salaries. It has now been reduced to Rs 600,000 for salaried persons. By bringing the tax slab lower, the government will milk the salariat for all it is worth.
Certain things remain unclear as the text of the budget speech is yet to be made available. How can the agricultural sector be revived unless there is a subsidy for diesel, power, chemical fertilisers and pesticides? It is yet not clear what is being done to boost exports through the five industries with zero-rated regime? They were demanding that with the withdrawal of their erstwhile status, they should have an efficient, credible and seamless mechanism for quick reimbursement of export refund claims, plus energy subsidies. This the government is not willing to do, for keeping the fund on the government’s books helps it display financial muscle.
The PTI has forgotten its hunch for foreign investments after embracing the IMF. This is very much like PM Imran Khan. The government dropped the economic team that had worked hard for months to formulate suggestions regarding the much-needed ease of business . Unless there is investment in the country, the economy would remain in dire straits. But who will risk one’s money in a country with no ease of business, no continuity in policies and a corrupt officialdom?
While the IMF team will pursue the goal ruthlessly, what stands in its way is the slow moving FBR . Will the PTI government which failed to raise Rs 4,000 billion in 11 months succeed in collecting Rs 5,500 b in a year? Many have strong doubts.
The new budget will hit the middle class and those below it really hard. The cumulative impact of various factors would be disastrous. The increase in prices of oil, diesel, power and gas, combined with high inflation and weakening of rupee will have a negative impact on the entire population while it will push the poor down the poverty line. According to one estimate about 2 million people are likely to go down the barrier.