Pakistan ‘s Budget, Hostage To The Army And IMF

In less than a month from now, Pakistan’s Prime Minister Shehbaz Sharif will present the annual budget … some critics have dismissed it as no more than a compliance document prepared to serve the interests of IMF’s “revenue efforts” while citizens bear the burden of inflation and indirect taxation.

Sharif for his part has been meeting representatives of chambers of commerce, other business people and concerned citizens … reports suggest he is considering a modest salary tax relief in the upcoming budget in Pakistan to help the middle class, but as an editorial in Dawn warned, such concessions are likely to increase the revenue gap. And where will the revenue loss be made up from?

“Mistaking IMF compliance for sound economic management is what is driving the economy into deeper stagnation. The growth model is broken,” it said.

Business leaders at a meeting with Sharif in Islamabad, called for tax and energy relief. They said that complex tax rules and elevated energy tariffs are undermining investment, exports and industrial competitiveness. Some suggested the government allow them to pay the basic cost of electricity.

“The prime minister took note of our proposals and some immediate decisions were made while others will be reflected in the budget,” Muhammad Hanif of the Karachi Chamber of Commerce was quoted as saying in media reports.

Other business leaders told Sharif they were paying 60% tax on income, leaving little for expansion, modernisation or new investment. there were demands for simplification of the National Tax Regime, elimination or reduction of the infrastructure cess by the Punjab government and so on.

How Sharif can square the circle remains to be seen. Al Jazeera reported that Pakistan is losing 6% of its GDP to corruption. Military-owned enterprises are encroaching into civilian areas using their proximity to power to leverage favourable terms for themselves.

Defence spending eats up around 15% of the national budget of Pakistan and military pensions are billed to the civil budget. If Pakistan is to grow and prosper and provide a better life for its teeming millions, the army’s iron grip over the nation must be eliminated, defence spending cut and the money spent on the social sector.

But the army will not let go, the politician-businessmen cabal around it will back the army and the square is never circled.