Need for more economic planning

November 25, 2018

A delegation from the Fund left the country at the end of last week with no agreement, except to meet again; possibly in two months. This period will allow the government’s fiscal measures such as increased power tariffs and cuts to the development budget to kick in thereby potentially leading to softer terms and conditions in the eventuality that a final deal is struck. Both sides could not reconcile their differences on thorny issues like increase in electricity prices, interest rate, devaluation and enhanced tax collection targets etc. The IMF asked Pakistan to enhance the revenue target of the Federal Board of Revenue (FBR) by over Rs. 300 billion for the current fiscal year. Since Ayub’s era, we are addicted to IMF’s bailouts. With every bailout a host of conditions come. These conditions, ostensibly meant for reforms, leave us in a deeper economic quagmire. Previous governments hoodwinked the nation by claiming to sever all ties with IMF, whereas in reality heavy loans were secured. This unwanted drift was maintained with exceptional enthusiasm under the PPP regime, when to our great fortune IMF suspended the program due to the government’s serious lapses, and in turn saving Pakistan from further indebtedness. The third time Nawaz set new records of borrowing at home and abroad. Soon after coming into power, the PTI Government invited IMF to appraise the likelihood of another Extended Fund Facility (EFF) of US$8-12-billion. PTI adopted a two-pronged strategy: reaching out to friendly countries and also to seek an IMF’s bailout.  So far, US$1 billion has been received from Saudi Arabia out of US$3 billion promised cash support in addition to deferred oil import payments of an equal amount for the next three years. Funds of over US$5 billion from China and United Arab Emirates are probable. What Parliament and the IMF need to be apprised of is the terms and conditions of loans and grants and bailout packages pledged by friendly nations. The main contentious issue between IMF and Pakistan has remained disclosure of China-related debt obligations. Though our Finance Minister told the Herald Finger, head of IMF’s team, that Pakistan believes in transparency and will not hide anything, there remained suspicions on the part of IMF. Using various pretexts, Finger managed to defer the parleys.  Asad Umar says that his government is not in a hurry to enter into any program with the Fund. The assistance that has been secured to stabilize the current account deficit does not mean that the government shouldn’t do more economic planning.  And this can only be done if full financial disclosures are made, a must for Pakistan’s long-term economic health. If we want to cure debt addiction we must come hard on tax evaders.

 

The major contentious issue between IMF and Pakistan has remained disclosure of China-related debt obligations.

 

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