No escape from IMF

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DESPITE repeated assurances by the quarters concerned that the country would no more take tough measures that could complicate the life of the common man, a senior official, while briefing the National Standing Committee on Finance about the macroeconomic targets, stated that the budgetary targets would be finalized in consultation with the International Monetary Fund (IMF) and hinted at slapping additional taxes of about Rs.500 billion in the upcoming budget.

Special Assistant to the Prime Minister on Finance and Revenue Dr Waqar Masood told the Committee that the Government has deferred the electricity tariff hike but it will have to be done in later stages.

The policy statement of the SAPM is a clear indication that there was no escape from the IMF and the Government will have to prepare its budgetary proposals strictly in line with what it has already agreed with the Fund.

This would necessarily mean putting additional burden on people who are already crying hard due to unbridled inflation.

It is all the more regrettable that the Government itself is fixing inflation target of 8% for the next financial year, which is yet another indication that there would be no relief for the masses as far as the inflationary pressure is concerned.

The implementation of IMF conditions and targets have made life of the common man miserable and people had pinned great hopes on the new Finance Minister who had held out repeated assurances that strict conditions like the raise in electricity tariff would not be implemented.

Now the SAPM says the hike in electricity tariff has just been deferred and that it will have to be done in later stages, which means energy related woes and inflation would remain there during the foreseeable future.

Pakistan’s energy tariff is highest in the region and apart from the general consumers, industrialists and businessmen have been describing this phenomenon as one of the major hurdles in the way of stimulating economic growth and meaningfully boosting exports due to tough competition.

According to media reports, the Government is also having second thoughts as far as much-needed relief for the government employees and pensioners is concerned.

Latest reports suggest that the authorities are contemplating to grant just 10% adhoc relief, which would be peanuts in the face of unprecedented price-hike that has forced fixed income groups to compromise on the quality of their life.

The situation might not be as serious for those who were lucky enough to receive 25% special allowance after a wave of protests but pensioners and employees who have not been granted this allowance would find it difficult to lead an honourable life if the Government ignores their plight.

Though the Government is also claiming that additional taxes would be collected through broadening of the tax base, the ultimate burden is borne by the end consumer. Dr. Waqar Masood himself has stated that in the next budget, the government would provide some relief to the people and there would be no such tax that would cause further inflation.

It implies steps would be taken to protect people against food inflation but not against general price-hike.

It is, however, somewhat heartening to hear that the Government intends to present a public sector development programme worth Rs. 900 billion and that about 25% of the programme would consist of new projects that would help accelerate the pace of socio-economic growth and create more employment opportunities.

But much depends on what actually transpires during the course of the year as in the past development budget was diverted to other sectors.

There is also an issue of low PSDP utilization which is also the case for the outgoing financial year as utilization stood at just Rs.406 billion till May 25, 2021 against released funds of Rs.560 billion.

The government argues the utilization of development funds remained low owing to COVID-19 pandemic, which adversely affected the development activities.

This might be true to some extent but the problem of low utilization is longstanding and remains there despite claims about improved monitoring and vigilance.

Vulnerabilities of health and education sectors became evident during the situation arising out of Coronavirus and, therefore, call for enhanced allocations for their modernization and expansion.

 

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