Prime Minister Shehbaz Sharif’s admission that the IMF dictates the budget should not be taken as the admission of a political neophyte, nor dismissed as revealing something that was any sort of secret. That the country is currently engaged with the IMF in negotiations for a new package must be kept in mind. Mr Sharif has seemingly been rattled by the general reaction to this government’s first budget, which has been generally negative. Even those who should defend the Budget, the Treasury Benches, are at best silent. The government’s main ally, the party without which it cannot survive, the PPP, has been critical of the Budget, and decided to vote for it because otherwise the government would have fallen. Mr Sharif has tried to limit the political damage, but he should not forget that his main opponent, the PTI, is giving the public the narrative that it will not submit to the IMF. The PTI’s record is one of doing a deal, and it has presented no alternative to that of doing what it says, but the message of defiance, even if without substance, has a resonance that this admission will probably not dampen. Mr Sharif may have extended the long bull run at the PSX by hinting coyly that a deal with the IMF is round the corner with the approval by the IMF of the Budget.
At the same time, his announcement that the government will not abolish the zero-rating enjoyed by exporters indicates that the PML(N) has vindicated its reputation as a business-friendly party. The continuing of zero-rating was one of the main demands of protesting exporters, who, like most Pakistani businessmen, have a strenuous objection to coming within the tax net. Coddling exporters may not amount to a whole policy, but it would be a step in the direction of obtaining the foreign exchange needed to service the country’s external debt.
At the same time, the Finance Minister has not stopped warning the retail sector that its days of remaining outside the tax net are over. The emphasis on expanding the tax net was known to come from the IMF, but now it has been brought into the open that the IMF is behind this step. Is Mr Sharif trying to send a signal to a core constituency? He would certainly like businessman, filers and non-filers alike, both compilers and evaders, that what is happening is not his fault.
