THE Government is taking credit and rightly so for prompt and successful completion of the last IMF review that would pave the way for release of the final tranche of $1.1 billion under the Standby Arrangement (SBA) programme after formal approval of the accord by the Executive Board of the Fund sometime in April. However, the country’s growing dependence on IMF addiction is a matter of concern for a majority of the people of Pakistan as there is no substantive evidence that the economy has improved meaningfully with these programmes that come with prohibitive cost for the general public.
For the short term, the latest development in Pak-IMF engagement augurs well for the economy as the quick and smooth culmination of talks sent a positive message to the market and other donors. The rupee has marginally improved despite the IMF mantra of ‘do more’ in relation to realization of the goal of so-called transparency and flexibility in the exchange rate and the business community has also given a positive reaction to the staff level agreement with the IMF. However, the understanding reached with the Fund to jack up prices of both electricity and gas further in coming months would play havoc with family budgets as well as the cost of doing business. There is simmering unrest among masses over repeated hikes in tariffs, which have burdened consumers badly without addressing the declared objective of resolving the chronic problem of the circular debt. As per the deal, the Government has committed to impose more taxes before the end of the ongoing financial year if agreed targets are not achieved. And there will be no end to the woes of the people as the IMF has officially acknowledged that Pakistan was seeking another medium-term programme and talks for the purpose would, probably, begin as soon as next month. This shows Pakistan is so badly trapped in debt that there is no way out except to seek a fresh bailout package from the IMF on completion of every ongoing programme. This is despite repeated claims made by almost all successive governments that their programme with the IMF would be the last one. One fails to understand if we are unable to manage our affairs as well as debt without fresh loan injections then what would happen after a few years when the debt would reach alarming levels. Therefore, instead of celebrating the successful conclusion of talks with the IMF, the authorities concerned should evolve a strategy with necessary input from all stakeholders to get rid of crippling reliance on foreign loans. On the face of it, Pakistan seeks another medium-term package from the IMF with the objective of permanently resolving its fiscal and external sustainability weaknesses, strengthening its economic recovery and laying the foundation for strong, sustainable and inclusive growth. These are lofty goals as these aim at strengthening public finances, including through gradual fiscal consolidation and broadening the tax base and improving tax administration to better debt sustainability and create space for higher priority development and social assistance spending to protect the vulnerable. These also envisage restoring the energy sector’s viability by accelerating cost reducing reforms including improving electricity transmission and distribution, moving captive power demand to the electricity grid, strengthening distribution company governance and management, and undertaking effective anti-theft efforts. Other objectives, as per IMF statement, include returning inflation to target, transparent and flexible FX market, promoting private-led activity, accelerating reforms in state-owned enterprises, scaling up investment in human capital and making growth more resilient and inclusive. No one would disagree with these objectives but the real issue is how this would be achieved. If the past experience is any guide, the axe always fell on the common man and real reforms were opposed by influential lobbies and the vested interests. By striking a quick deal with the IMF, the new Government has made its intentions known to implement crucial reforms. It is, however, to be seen what would be the ultimate nature of these reforms: mere increase in tariffs and taxation or a genuine attempt to reform working of the energy sector through modernization and elimination of theft and imposition of taxes on the holy cows. Instead of passively looking towards the IMF to propose what we have to do, all ministries and departments should be engaged in a comprehensive exercise to prepare our own reform programme.
