We recognise that Pakistan needs a faster disbursal of the bailout money, and we welcome the result, but are very deeply disturbed by the process. ILLUSTRATION: JAMAL KHURSHID
We recognise that Pakistan needs a faster disbursal of the bailout money, and we welcome the result, but are very deeply disturbed by the process. By resorting to such tactics, the IMF has effectively surrendered on the notion of trying to pressure the finance ministry to raise more tax revenue. Yes, we still occasionally get the statements from the international lender supporting the idea, but its actions speak otherwise. It is, of course, not the job of the IMF to motivate the finance ministry to act in a rational manner. But if borrowed money is the narcotic, and the finance ministry is the addict, then in this particular case, the IMF is playing the role of the drug dealer. It is time to separate the dealer from the addict.
The most disappointing aspect of this whole situation is the fact that, six months after coming into office, the Nawaz Administration has still not articulated a clear revenue generation policy that would free the country of such arithmetic shenanigans. Saying that they want to tax the wealthy is not enough. They have to lay out and execute the strategy for making that happen. And while the Prime Minister’s House remains silent, the civil servants in Q Block will continue business as usual, all the while, the country’s financial health withers away.
Published in The Express Tribune, November 18th, 2013.
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ETBLOGS1987
@abdussamad:
I would not say that the original schedule that IMF laid out was unrealistic - rather that GoP committed to a schedule because that was necessary to get the loan approved. Then they chose not to make the belt tightening measures necessary to meet the committed goals. They did not clamp down on imports and so the CAD remained much wider than they had projected. Furthermore despite having agreed to implement policies that would increase forex reserves, they actually intervened in the forex market to slow down the depreciation of the rupee. They assumed that they could simply talk their way out but IMF is holding the government's feet to fire. If they cannot clamp down on imports then they must adjust their policies around currency management, monetary policy and borrow money. One way or another they need to ramp up the forex reserves.
The same issue surrounds fiscal deficit. In view of the fact that the government has not implemented significant reforms to address underrecoveries, the circular debt is once more ballooning after having been wiped off once. Rather than giving a free pass, IMF has now given more granular direction instead of the original broad idea that government should reform the power sector.
If the government assumes that the IMF review is a mere formality and the 2nd tranche will be disbursed, regardless of whether they take corrective action in the areas that they had agreed to, the actual disbursal of the 2nd tranche will be delayed and if it becomes clear after a point that there is no willingness to tighten the belt and start living within their means, Pakistan will continue its record of being a one tranche country.
@meekal ahmed: I think you are being a little harsh here. The schedule the IMF set out initially was unrealistic. Another article talked about how Pakistan would have to arrange $2 billion from other sources in this fiscal year alone. There is no way that is going to happen. So, yes, we need faster disbursements but not so fast that reforms are shelved. They are making these changes because they want to keep the country going until at least the end of 2014.
Interesting and provocative words.
While we all abhor "window-dressing", in which country, with or without an IMF arrangement do projections of key economic variables remain the same, as if cast in stone? Revisions are always made as new information comes in.
At the same time, you want that the IMF accelerate it's disbursements? So you want to repeat the disaster of 2008 -- lots of money up-front, and reforms "later", undermining your own argument.