The second tranche

The IMF is almost convinced and is gearing up to dole out the second tranche. This is good news for a dilapidated economy, and hints that reforms strategy is taking roots. The Fund’s Managing Director’s nod that $710 million will be released next week, as part of the $3 billion Standby Arrangement with Pakistan, had been due for long and a lot of hard homework had gone into realising it. The spiral that was seen in bourses last week, and the confidence of investors and traders is also an indication that the rupee is picking momentum and the flight of the dollar has been arrested to a great extent. Perhaps, this was possible as a crackdown on hoarders, black marketers and smugglers had bred positive results, especially checking on the security depreciation on the western frontiers of Pakistan.

There is a word of caution, however, too from the Fund. The international lender, which is closely monitoring the trajectory of reforms, has called for transparency and accountability in business deals. This means a perfect institutional mechanism is desired in decision-making, and no more ad hocism as is the case, per se. The stabilisation programme along with long-term reforms was subject to successful reviews, and loss making units and the arenas of agriculture, industry and taxation were all up for new gigantic tasks. This is why the IMF says the obstacle affecting the release of the tranche is the rotten and corrupt tax collection mechanism. Pakistan collects 12 per cent tax-to-GDP, which the Fund says can go up to 15 per cent to help the revenues support the economy. The enigma of subsidising the wealthy class when they can pay for taxes such as in real estate, landlords and industrialists merely for political considerations must end.

Pakistan is closely eyeing bonanza deals from minerals, especially the Reko Diq deal with Saudi Arabia. A staggering $70 billion is expected which can be a fortune, to say the least. The question, nonetheless, is: will the economy be glued to the Fund in years to come or there is a plan to become self-reliant?

Published in The Express Tribune, November 16^th, 2023.

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