24th bailout, but…
Pakistan has once again signed on the dotted lines, to clinch a 24th bailout package from the IMF. This time around, it has come with more stringent and legislative-backed conditionalities, bringing the recipient state on its knees. The agreement follows the government’s nod to bring transparency in the affairs of Sovereign Wealth Fund; almost decimate the newly-floated SIFC; ensure taxation on agrarian economy and exporters; and introduce fiscal and revenue generation reforms. To what extent it has undermined national sovereignty for a package intended to merely stay afloat, and how lethal will be its crushing impact on an already sizzling nation under inflation is anybody’s guess.
The staff-level agreement, done after passing a highly-unpopular Finance Bill coming with ultra-loaded taxes, will ensure $7 billion under an Extended Fund Facility. In doing so, Islamabad has exhausted its SDRs with the Washington-based lender, and a peep into its softies reveals that it is more of a political deal than economic. A lot of real-politick is involved too as one of the unsaid demands is to inch away from the Chinese largesse, and to audit the CPEC projects. Likewise, for the first time provinces have been made to feel the heat by taking steps that otherwise remained obscured under an elite capture. The institution of a new National Fiscal Pact between the Federation and its units is a case in point.
A cursory look at the loan procured for 37 months reveals some horrifying ‘do more’ ingredients such as: collecting Rs1.7 trillion of taxes from salaried class and the poor; increasing in electricity tariff to generate an additional Rs580 billion from residential and commercial consumers; and achieving a primary budget surplus of 1% of the GDP in the ongoing fiscal year. It is no less than a dream-line, but only at the extinction of the have-nots. Taking into account political instability, it is hard to believe that this will be the last programme with the Fund, and that it will support efforts to cement macroeconomics for inclusive and resilient growth.