Economic reforms — half-heartedly enacted
IMF’s three-year Extended Fund Facility programme seems to have added to an already mounting debt burden for Pakistan
IMF’s three-year Extended Fund Facility programme seems to have added to an already mounting debt burden for Pakistan. PHOTO: AFP
The IMF’s three-year Extended Fund Facility (EFF) programme, which is scheduled to end by September, seems to have added to an already mounting debt burden for Pakistan while attempting rather half-heartedly at introducing structural adjustment reforms for which the programme was contracted in the first place. The IMF recently approved the second last loan tranche of the EFF amounting to $501 million amid concerns that Pakistan may not go ahead with all the promised reforms once the three-year programme ends, whose objective was to achieve macro-economic stability through stringent austerity by keeping a tight lid on budgetary deficit while hoping for the economy to spare enough resources to grow at a rate that would generate enough revenue and jobs causing its tax-to-GDP and investment-to-GDP ratios to improve to sustainable levels. This has not happened so far because a government exclusively focused on keeping the programme from being scuttled before completion and losing the IMF’s much-needed monetary assistance, maintained a reasonably tight lid on the budgetary deficit by cutting down drastically on development programmes while the non-development expenditure continued to gallop on unchecked.
As a result, while the programme is about to end, our tax-to-GDP and investment-to-GDP ratios are still too low, the growth rate still inadequate, the rate of unemployment unsustainable and the debt burden increasingly unbearable. This has happened despite the IMF giving over 15 major waivers during the last 10 reviews in order to keep the programme on track notwithstanding dismal performance in critical areas. The IMF has repeatedly said that complete implementation of reforms will require continued efforts beyond the programme period and will help set Pakistan on a permanently high growth trajectory. However, one does not expect the government to follow this advice because of two reasons: one, the remaining reforms, if implemented, would cause serious hardship and dislocation to the current economic captains of the country which the ruling elite would find politically unaffordable. Two, the next 12 months would be election months during which the government can hardly afford to be managing a tight-fisted economy subjected to austerity. Concerns over Pakistan’s sincerity to fully implement the structural adjustment programme, therefore, aren’t unfounded at all.
Published in The Express Tribune, July 4th, 2016.
As a result, while the programme is about to end, our tax-to-GDP and investment-to-GDP ratios are still too low, the growth rate still inadequate, the rate of unemployment unsustainable and the debt burden increasingly unbearable. This has happened despite the IMF giving over 15 major waivers during the last 10 reviews in order to keep the programme on track notwithstanding dismal performance in critical areas. The IMF has repeatedly said that complete implementation of reforms will require continued efforts beyond the programme period and will help set Pakistan on a permanently high growth trajectory. However, one does not expect the government to follow this advice because of two reasons: one, the remaining reforms, if implemented, would cause serious hardship and dislocation to the current economic captains of the country which the ruling elite would find politically unaffordable. Two, the next 12 months would be election months during which the government can hardly afford to be managing a tight-fisted economy subjected to austerity. Concerns over Pakistan’s sincerity to fully implement the structural adjustment programme, therefore, aren’t unfounded at all.
Published in The Express Tribune, July 4th, 2016.