No easy road to bailout

The government’s efforts to secure an economic stabilisation bailout from the IMF appear to be heading in the expected direction.

A senior government official has said that after internal consultations, the government prepared a draft Memorandum of Economic and Financial Policies (MEFP) for the IMF to review. For its part, the global monetary organisation is looking at Pakistan’s books with a magnifying glass, asking questions about its external payment plans, the Rs90 billion revenue shortfall in the past four months and details on the government’s plans to limit the fiscal deficit to 5.1%.

The IMF also questioned the performance of the power sector which has seen the circular debt balloon to Rs1.2 trillion — all since the IMF’s last programme ended in September 2016.

The global monetary body will be meeting with all the key economic and fiscal nodes of the country to draft up its terms for the $6 billion bailout. The government will do its homework to negotiate favourable terms.

That the country’s economy is in a shambles is quite evident. The question is how can this hot mess be fixed?

Prime Minister Imran Khan has already clashed with the country’s chief revenue collector — the Federal Board of Revenue — earlier this week over poor revenue collection in the first quarter. The board’s poor performance seemed to have stretched Imran’s patience thin who looked at the numbers and asked whether the board should be reformed or would the government be better off by creating a new tax collection body from scratch.

On the power sector front, the government has told the visiting IMF team about the increased tariffs as part of measures to cut the shortfall. But like in the tax sector, its promises of going after the large pilferers and bill dodgers sound ambitious.

The extent of terms offered and agreed to by the government to secure the bailout will be apparent early next week when the talks are due to be finalised, but there are strong indications that the terms will be quite steep, forcing the government into a tight fiscal corner.

Published in The Express Tribune, November 14^th, 2018.

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