The preparation of the budget has been an uphill task for the government in the face of what appear to be “testing” economic circumstances. Over the past few years the country’s economy has been facing multidimensional problems in the form of aftershocks of growing militancy and an aggravating energy crisis.
Experts argue that the most critical task for economic managers will be to strike a “needed balance” between sustaining GDP growth and controlling rising inflation.
At stake will be the credibility of the democratic government if, according to experts, either of these factors are not handled carefully.
The government will have to move swiftly to settle the issue of replacing the current taxation system with Value Added Tax (VAT). For this, the government will have to evolve a consensus among the provinces ahead of the presentation of the budget to parliament on June 5.
According to media reports, the Centre and the Sindh government have already reached some sort of understanding on the issue but there has not been an official confirmation so far.
In jeopardy will be the future of a multibillion-dollar loan agreement Pakistan signed with the International Monetary Fund (IMF) in 2008 to steer the economy out of crisis.
The IMF has been pushing Pakistan to replace the existing General Sales Tax (GST) system with VAT from the upcoming fiscal year in a bid to broaden the tax base.
Opposition groups, meanwhile, are strongly opposed to the VAT. “We will give the government a tough time,” Opposition Leader Chaudhry Nisar Ali Khan told journalists on Tuesday.
Published in the Express Tribune June 3rd, 2010.
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