Federal finance has become a slow dance between the ministry, which needs the money to meet expenses, the IMF, which is to lend us the money and the parliament, whose acquiescence is constitutionally required to pass the finance bill. Though this is a scenario that is played out all over the world in countries that seek loan programmes, our situation is slightly pricklier because of the rather weak government at the centre. Garnering a simple majority in parliament is not as simple a matter for the ruling PPP. The ANP is its only dependable ally and is on the same page as far as economic policy is concerned. Between the two of them, however, they don’t have enough to even survive a vote of confidence. For getting more votes, the treasury benches need the support of the MQM and perhaps the PML(Q). Now though the latter two might have joined the fray – treasury benches now have enough to even amend the constitution if the wanted to – they have no love lost for what the financial mandarins have in mind. Particularly newer taxation measures.
That, unfortunately, is the deal breaker for the IMF. As a compromise, the finance minister and his team offered, in case there is no movement on the RGST front, to do away with certain tax exemptions instead. Let’s agree on the size of the deficit, not how we go on achieving that. At the moment, there are differing reports about whether this spiel has any takers over at the Fund.
As things stand, the default position is to take the RGST proposal to the parliament. In case, the big business lobbyists carry the day and it is rejected, Plan B kicks in. That would entail not just an end to certain exemptions but also going cold turkey on a number of subsidies. The populist detractors of the newer taxation measures need to realise that the deficit has to be bridged to a certain extent one way or the other. An end to targeted subsidies is all well and good but soon, there won’t be enough money even for essential ones. The wiggle room is disappearing fast. Converting our indirect sales taxes to value-added taxes, however, does not hurt the poor or middle-class one bit.
