Implementing reforms

The government has assured IMF that no new SROs will be issued while also promising more autonomy for the SBP

The IMF, under the $6.6 billion bailout programme meant to aid Pakistan’s growth and move towards economic stability, has issued a new set of conditions to the government. Its fulfillment would pave the way for the next loan tranche after Pakistan secured $1.05 billion during the clubbed fourth and fifth reviews earlier this month. The conditions focused on strengthening the State Bank of Pakistan (SBP), freeing it from the clutches of the finance ministry in a bid to grant it more autonomy and improve the working of the Federal Board of Revenue (FBR).

The Extended Fund Facility, which was approved by the international lender in September 2013, means that Pakistan has to continuously implement structural reforms that would strengthen its economy, improve business climate and increase its revenues while protecting the vulnerable from the impact of these measures. Hence, the most crucial role is to be played by the SBP and specifically the FBR. One hardly raises an eyebrow when fingers are pointed at this inept body. Tax collection, in absolute terms, may be on the rise but the fall in the number of registered taxpayers is a reminder of the FBR’s ineffectiveness. For years, the public has asked for an easier process to file tax returns. The FBR has repeatedly ignored these appeals. Now, the IMF has set an indicative ceiling of the collection target. It has asked for an end to the issuing of Statutory Regulatory Orders (SROs) that benefit certain influential segments of the economy by giving them tax exemptions. The government has assured that no new SROs would be issued while also promising more autonomy for the SBP. While admitting that it could not implement some reforms, Pakistan has also assured the IMF that the programme would now remain on track. Despite the urgent need for implementation, these reforms have never seen the light of day. In hope of securing the next loan tranche, the government might just go ahead with these changes that it has promised time and again.

Published in The Express Tribune, December 26^th,  2014.

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