Mini-budget approval

The government has managed to prove its majority in the National Assembly by pushing through the mini-budget and the SBP Amendment Bill, both of which are necessary to meet IMF loan conditions. The ease with which the bills passed was surprising for some watchers, as cracks had been reported within the ruling coalition and even the PTI itself. Just hours before the assembly session, there were reports of conflict between top PTI leaders which extended to Prime Minister Imran Khan. But none of these divisions were visible when the actual vote took place. While the government did withdraw a few taxes, including an exemption for nanbais and “small” shops selling different types of bread and other basic baked items, most of the bill remained as-is, including taxes on larger containers of baby formula.

There were also some heated moments as the opposition raised the House’s failure to debate recommendations from the Senate, and the fact that the opposition’s amendments were rejected through voice votes, even though later physical votes showed there was a relatively slim margin. There was also a half-hearted attempt by ruling party allies to distance themselves from the mini-budget by criticising its contents and claiming they were not consulted. Yet, if we run the numbers, it is pretty clear that the bill would have failed if those same parties had taken a principled stand.

Finance Minister Shaukat Tarin also took an interesting approach to counter criticism of the massive tax bomb, noting that the IMF had been calling for value-added taxes such as the ones being imposed for over a decade — making an explicit reference to his time as Finance Minister from 2008 to 2010 during the PPP government. This could be considered a thinly-veiled punch, as the years since then have seen both PPP and PML-N governments fail to address these concerns from the international lender. The problem here is that these much-needed reforms are coming at a time of severe economic instability when most people cannot risk or even afford the burden of significant new taxes. We still don’t know how the government can claim that taking more money out of lower-income people’s pockets will “bring stability to the country’s economy”.

Published in The Express Tribune, January 15^th, 2022.

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