Pakistan’s economy seems to be in an uncharted territory. Its prolonged disagreement with the International Monetary Fund is toiling. Of late, reports that an interim staff-level deal is struck has apparently come with more stringent conditionalities. The $6 billion Extended Fund Facility, whose sixth review has been in limbo since April, is unlikely to be realised unless measures are taken to curb inflation and enable exchange rate flexibility as per the donor’s dictum.
In other words, it means a mini-budget of sorts, as well as revival of the benchmarks in terms of tax collection, tariff barriers and subsidies. What impact it will have on hard-pressed masses is anybody’s guess. But the fact is that the government decision to go into an IMF programme hasn’t served any purpose and has rather dented its credibility.
Reports from Washington, however, say that the IMF is breathing happily. The international donor has appreciated Islamabad for navigating through a difficult environment — and that too at a time when the prices of commodities and oil are at an all-time high. Moreover, Pakistan also got a pat on its shoulders for its anti-money laundering efforts and cajoling a consensus with the Paris Club known as FATF.
But that is not enough. As a revisit to Shakespeare’s theatre, Shylock is in need of a pound of flesh. And that won’t be possible without spilling blood. In simple arithmetic, revenues must surpass expenditures. It means more taxes and rollback on subsidies. The government has already withdrawn several tax exemptions announced in the budget and raised energy tariff, apart from pegging the petroleum products to international index. Current account deficit has swelled to $5.08 billion in the first four months of the current fiscal year due to a surge in imports.
This has diminished the purchasing power and led to fears of stagnation. The rushing through of amendments empowering the central bank are other exigency steps that the government had undertaken to keep its word with the IMF. All this crisscross is for bagging a mere $1 billion or so to stay afloat. High time to think out of the box, and something real!
Published in The Express Tribune, November 23rd, 2021.
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