Problems on the domestic front
With a business friendly budget full of tax breaks and a shift from the conventional development oriented budget towards current expenditures the PML-N haphazardly presented its final budget for which it has received tremendous criticism. Finance Minister Miftah Ismail in the post budget press conference ensured confidently that there are no plans to go to the IMF. Go back a few months and it was very difficult to get behind that notion but certain things have changed.
Pressure on foreign exchange reserves has somewhat eased since the State Bank has rightly been given back its mandate to manage the exchange rate, something former finance minister Ishaq Dar would obsessively do himself in an incompetent fashion using limited foreign exchange reserves. Falling remittances and exports did not help matters either. Then there is the controversial tax amnesty scheme through which reportedly funds have already started flowing in. Perhaps the detailed confidentiality clause and low tax rates ranging from 2% to 5% make it quite attractive to those with undeclared funds parked abroad. If it is a success then there is a chance a knock on the IMF’s door becomes unnecessary.
But on the domestic front the sort of tax cuts and incentives given to the business community required more explanation, especially how these would be financed. Increasing the tax net by introducing “information sharing with banks and collaboration with NADRA” is nothing new and has not worked in the past as evidenced by the drop in the number of tax filers this year.
From a political standpoint Miftah is set to contest from Karachi on the back of the package announced for Karachi by the PML-N and the budget itself that gives concessions and incentives to that very constituency. Karachi however is MQM territory and the party has not lost there for the last three elections. Even with the dismantling of the MQM now complete a N-league win in NA-242/243 will be tough to pull off.
