Mini budget


FINANCE Minister Ishaq Dar on Wednesday tabled Finance (Supplementary) Bill 2023 dubbed as “mini-budget” in the National Assembly and Senate in order to meet the conditions set by the International Monetary Fund (IMF) for the revival of the derailed $6.5 billion programme after President Arif Alvi refused to promulgate an ordinance sent by the government. The government through the supplementary bill has proposed to raise the goods and services tax to 18% from the existing 17% and up to 25% in the case of luxury items as part of efforts to raise 170 billion rupees ($639 million) in extra revenue during the current fiscal year ending July. As if all this was not enough, the Government revised upward the prices of POL products as part of the fortnightly revision and as a consequence the price of petrol (at Rs 272 per litre) stood at the highest in the history of the country.

The Finance Minister was visibly perturbed while presenting the supplementary bill which is being described by the opposition as ‘jumbo budget’, as it did contain measures that would make life of the common man miserable. It is quite understandable that imposition of additional taxes of this magnitude in the midst of the financial year and that too ahead of the general election as well as elections of two provincial assemblies/by-elections for NA seats vacated by PTI was not an easy decision for an elected government but the authorities have to succumb to the IMF pressure to clinch a deal that assumes greater significance for the national economy in the prevailing circumstances.

We have been emphasizing in these columns that the Government team led by Finance Minister Ishaq Dar tried its level best to avoid those measures that would add more burden on the already stressed common man but the IMF was in no mood to listen because of the lack of trust caused by gross violations of the agreed accord by the previous PTI government. It is also a fact that some adjustments in the economy were needed to address critical issues of low tax collection and rising circular debt in gas and power sectors. People are genuinely worried because of their shrinking incomes but according to local and global financial and economic experts even these painful adjustments are unlikely to meaningfully help in the given circumstances and a way forward will have to be found through collective efforts. It was in this backdrop that the Finance Minister, in his speech in the National Assembly, asked the people to adopt a simple way of life and called upon all stakeholders to join hands to draw up a national economic agenda through consensus, hoping that all institutions would extend their support for this noble cause.

It is widely believed that the Government had to accept the IMF conditions to avoid the threat of an impending default. As for taxation of luxury goods and imposition of tax on those who have the capacity to pay, this is the right approach and, therefore, levy of about 25% GST on luxury goods and increase in tax on business/first class air travel is understandable. The Government definitely needs to increase its income to decrease the yawning budget deficit and well-to-do segments of the society must contribute to the national endeavour to help the country stand on its own feet. However, the proposal to increase GST by one percent across the board is lamentable as it would push up prices of all products and services. It is an open secret that the falling rupee, soaring prices of POL products, enhanced electricity and gas tariffs, increase in GST rate, recent decision to hike prices of medicines and 10% advance tax on wedding ceremonies would trigger a new and unprecedented wave of inflation and that too when resources of the fixed income groups are static. No doubt, the Government has increased the budgetary allocations for Benazir Income Support Programme (BISP) by Rs 40 billion but the programme has not and will not mitigate sufferings of the majority of the population as the programme has limited access both in terms of beneficiaries and cash disbursements.

There is, in fact, a need for an overall review of the Government’s policy of resorting to frequent increases in POL products as well as electricity and gas tariffs that burden all and slow down economic activities. Instead, affluent classes which are still either out of the tax net or under-taxed, should be made to pay their due taxes.