The rumpus in the national assembly the other day was perhaps a taste of things to come. The debate, meant to be a precursor to the finance bill for the upcoming fiscal year, was met by much jeering, predominantly by PML(N) members. Meanwhile, the chair of the standing committee on finance disclosed the prospect of removing the subsidies in the upcoming budget. Politically, this is just about the worst time to be presenting a budget like the one being currently envisioned by the mandarins over at the finance ministry.
Though they don’t have a choice, really. In addition to being geared towards expanding the tax base, the budget is also going to see an end to a number of subsidies, most notably the ones on electricity. The decision to phase out subsidies is not a part of our IMF program, as is erroneously thought, though the Fund sure does place it as one of their conditions. The government of Pakistan had decided, rather, to phase out subsidies since quite some time now; before, at any rate, the IMF program. Subsidies are not a sustainable option and they cost a packet too. Tariff differential subsidy on electricity alone was estimated to be Rs 186 billion this fiscal. Even left-leaning governments the world over have realised that though government programs should foot the bill for much social security, the one-size-fits-all subsidy is a plain waste of money. Subsidised flour goes to the poor as well as swanky hotels; electricity subsidies go to the three-bulbs-and-a-fan household as well as the four-air-conditioners demographic. Targeted subsidies, like income support programs and ration cards, would be the way of the future.
For a numbers-deprived government, a tough-love budget could spell disaster. That is where the PML(Q) comes in. The party will get the treasury benches enough ayes to carry the finance bill through.
The league might be playing hard to get but they don’t have many options. Which surprisingly, is how one could describe the ruling PPP as well. It is – to borrow a term from old Hollywood – a meet cute.
