AT a time when the country is in talks with the IMF for a medium-term loan crucial to bolstering the fragile economic stability achieved in recent months, the PTI government in KP has stirred up a needless controversy by announcing the provincial budget before the centre could unveil its own. The Gandapur administration has done nothing illegal by breaking with tradition, but the action is being seen by the federal authorities as an act of defiance aimed at undermining talks with the IMF. In this case, the federal government has valid reason to be upset at the provincial action. The fact is that the federal finance ministry has just started to develop a roadmap for the implementation of the budgetary framework proposed by the IMF as prior action for concluding a staff-level agreement. The framework might have a few tasks for the federating units, which would require the provinces to wait for the announcement of the federal budget. One is hopeful that the PTI will not hurry the passage of the budget and will ensure that it accommodates the goals the lender may have set for the federating units in its suggested budgetary framework.

With the nation in the throes of an unprecedented economic crisis, characterised by stubborn inflation and near-zero growth, it is time to put aside political differences and display a united front in the larger interest of the economy. Given the fractious nature of politics in the country, which includes tough posturing by the KP government, the proposed provincial budget was expected to be a populist one. At the same time, the budget attempts to implement some important reforms to expand the province’s tax base and revenues. This shows that the present KP leadership and its finance team are well aware of the challenges that the economy faces. With such monetary difficulties, the centre and the federating units are best off working together.

Published in Dawn, May 26th, 2024