WITH the Shehbaz Sharif-led government still fine-tuning the next budget, it might be too early to speculate upon the contents of the document. We will have to wait for a few more days before the budget proposals are firmed up and their contents finalised.

But what is certain is that in trying to achieve a balance between its political compulsions — providing succour to households no longer able to hold up against backbreaking inflation — and the necessity of plugging a deep fiscal hole in the economy, the government is faced with one of its most difficult challenges.

The confusion in the minds of the party leadership on how to deal with this paradox became even more evident on Wednesday when a PML-N meeting chaired by party leader Nawaz Sharif and attended by the prime minister decided to prepare a ‘people-friendly’ budget while adhering to IMF dictates. Not surprisingly, there was no official word either from the PML-N or the federal government on the outcome of the discussions. However, it is abundantly clear that the prime minister, caught between public expectations and harsh IMF demands, is in a fix.

The confusion in the PML-N over what shape the budget should take is reflective of the country’s volatile political situation. On the one hand, the ruling party is not ready to lose more political capital by taking harsh measures, and on the other, it must swallow the bitter pill of stern IMF demands, if it wants to access international funding, which is crucial for reviving the economy.

At the same time, PML-N president Nawaz Sharif, who resumed his position some days ago after a long hiatus of six years following his disqualification, needs something tangible on the economic front to not just defeat the narrative of his popular arch-rival Imran Khan in Punjab but also maintain his existing public support. His party has already suffered in the February elections due to the extremely poor economic performance of the previous Shehbaz Sharif administration, which saw monthly inflation skyrocket to 38pc and interest rates jump to a record high of 22pc, besides industrial closures and job losses.

It is, therefore, safe to assume that the PML-N will do its best to meet the IMF’s macroeconomic targets at the federal level, whilst taking populist measures in the Punjab budget to revive its party network in the province.

The PTI government in KP, which announced its next budget last week — much before the federal budget in a break from convention — has already shown other provinces how they can use their respective budget resources to execute the party programmes to keep their electorate happy without diverging from the IMF’s conditions. There is little likelihood of other parties not giving in to this temptation.

Published in Dawn, May 31st, 2024