ISLAMABAD  - Mini-budgets to comply with the International Monetary Fund conditionalities was a ‘regrettably regressive practice,’ Pakistan People’s Party Vice President Senator Sherry Rehman said Thursday.

Last day, the government imposed additional taxes of over Rs 40 billion allegedly to comply with a pre-condition of the IMF. The ‘mini-budget’ increased tax on 289 imported items and imposed regulatory duty on 61 products.

The move has been criticized extensively by economists and has stoked concerns about the regressive turn that the federal government’s taxation measures may be taking.

Failing to meet deficit targets under the Extended Fund Facility of the IMF, the federal government had been under pressure to increase revenues.

Experts also note that there was no significant improvement in fundamentals of the economy, with only exogenous factors – such as historically low international oil prices – providing some relief.

Senator Rehman criticized the federal government on issuing another mini-budget to make up for its failure to expand the tax net. “Our entire economic policy ignores public input, regardless of how the common man gets affected, nor is the annual budget of any significance anymore,” she said. She added, “Despite the different explanations given by the finance ministry about the recent tax moves, it is clear that the real objective is to bridge the FBR’s revenue shortfall ahead of the next IMF tranche.”

The lawmaker said the government had repeatedly failed to meet its own revenue targets, despite a significant shuffle in the tax bureaucracy and with little to show in terms of actual performance, the finance ministry continued to rely on symbolism. She said there was little visible effort from the federal government to expand the tax net, while it continued to rely on indirect taxes that were choking the middle income and salaried classes.

Commenting on the performance of the finance ministry, Senator Rehman said the federal government’s policy stance was a reversal of its own agenda. “How can they expect to spur growth by increasing tax burden on those who are already in the tax net,” she questioned.

While continuing to increase the incidence of tax through mini-budgets, the government has also increased domestic borrowing. Contrary to the expectations from a historically low discount rate, private sector investment has failed to pick up pace, she contended.

“Clearly, the only beneficiary of low interest rates is the government itself. The private sector, on the other hand, continues to suffer from increasing costs of doing business,” the PPP leader said. The legislator recalled as many as five ‘mini-budgets’ were introduced during the last fiscal year by the federal government, without any parliamentary approval.

In most cases, the announcement was preceded by a failure to meet quarterly revenue targets set by the government, she said. The IMF has also directed the government to refrain from issuing statutory regulatory orders with the objective of bringing down the fiscal deficit.

“Changing the nomenclature of SROs will not make a difference to the practice of using executive authority to impose or exempt taxes,” she reminded.