Pakistan is keeping its fingers crossed as talks for a new tranche from the IMF hang in the balance. The protracted negotiations with the Fund in Washington are apparently more technical based. The country’s annual budget swings as a pendulum, as until and unless the proposed statistics are approved by the international lender, the same may hit snags. Primarily, the IMF has reservations over Rs9.5 trillion expenditures proposed in the budget. It believes that the government has set lofty targets, and the revenue generation may not exceed Rs7 trillion. Thus, the gap is cumbersome and, at least, the donor does not want it to be serviced through borrowing. This is where the standoff is and solicits intricate maneuvering to stay afloat.
Finance Minister Miftah Ismail, however, is optimistic that the deal would be done, and a $900 million tranche will be released. This succor is indispensable to avoid not only an imminent default, but also turn around the wheel of economy. The timeframe projected is over the weekend, and it seems there is some diplomatic largesse at work on the part of the US to help strike a deal. The barometer at which the deal is struck is anybody’s guess, but the hunch is that the IMF will compel the government to cut down on increase in salaries proposed at 15% and roll back tax exemptions for those earning less than Rs1.2 million annually.
The devil, nonetheless, is in the details as more raise in petroleum and energy prices is on the cards. The Fund is unrelenting in any kind of subsidies, and is wary of insulating even the downtrodden in these harsh times. But the minister argues that the IMF has nothing to do with salaries as it depends on the government’s discretion. But one thing is for sure, the $6 billion EFF arrangement signed in July 2019 still has its shadows to cast. Pakistan’s desire to resume disbursements of the stalled package, and also to expand the size and duration of the programme is not being reciprocated, accordingly. This tribulation with the IMF is not new, and we have been here very often. This entails a choreographed and time-barred approach towards the tangibles of Pakistan economy, in order to let it stand on its feet.
Published in The Express Tribune, June 22nd, 2022.
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