By Sardar Khan Niazi
Facing an acute balance of payments crisis, Pakistan wants to secure much-needed external financing. For too long the country has been running on loans, aid, oil facilities, and so on.
Pakistan secured a $6 billion IMF bailout in 2019 replenished with another USD 1.1 billion in 2022 to help the country following the unprecedented floods. However, the IMF suspended disbursements due to the country’s failure to make more progress on fiscal consolidation amidst political turmoil in the country.
Sharply criticizing the IMF, Foreign Minister Bilawal Bhutto says unfortunately the Fund is ignoring his country’s crushing need for financial help. He says his country is facing a perfect storm of troubles i.e. an economic crisis, the consequences of catastrophic flooding, and terrorism that is once again rearing its ugly head.
In a wide-ranging interview with The Associated Press, he said that Pakistan, like other countries, is also beset by hyper-partisan and hyperpolarized politics. Discussing cash-strapped Pakistan’s crushing need for financial help, he sharply criticized the International Monetary Fund, which last month delayed a $6 billion bailout over Pakistan’s failure to meet terms of a 2019 deal.
Government officials say that the IMF has given new instructions to Pakistan to raise and collect taxes as well as slash subsidies without burdening poor people. Pakistan is in a race against time to implement measures to reach an agreement with the IMF.
The agreement with the IMF on the completion of the ninth review of a $7 billion loan program delayed since late last year would not only lead to a disbursement of $1.2bn but also unlock inflows from friendly countries. The prerequisites by the lender aim at ensuring Pakistan shrinks its fiscal deficit ahead of its annual budget around June.
Pakistan has already taken most of the other prior actions, which included hikes in fuel and energy tariffs, the withdrawal of subsidies in export and power sectors, and generating more revenues through new taxation in a supplementary budget. As a last step, the international lender has required Pakistan to guarantee that its balance of payments deficit is fully financed for the remaining period of an IMF program.
Bilawal Bhutto supports expanding revenue collection and believes those who are well off should pay more, but says Pakistan has been unable to achieve structural tax reform for the last 23 IMF programs that it has been a part of. It is high time to nitpick about our tax policy and tax collection.
He adds the IMF is not being fair to Pakistan, which is also dealing with 100,000 new refugees following the West’s withdrawal from Afghanistan and a steady uptick of terrorist activities within our country, he added by saying.
The IMF is stretching out talks on a bailout when the country needs money immediately to help the poorest of the poor whose homes and crops were washed away in the floods and we are being told that until their tax reform is not complete, we will not conclude the IMF program.
Pakistan has been able to keep its head above water despite the impact of the COVID-19 pandemic, the August 2021 Taliban seizure of power in Afghanistan, inflation, and supply chain disruptions. Nevertheless, the last summer’s floods were awesome generating devastating climate catastrophes.
The country’s economy has run on support from friendly countries, IMF tranches, oil facilities, debt restructuring, and remittances. Terming IMF as being unfair to Pakistan is no solution to our problems. IMF programs are beneficial for lower-income countries witnessing external shocks or macroeconomic imbalances.
The decades of economic mismanagement and coming back to the IMF for rescue have accustomed people to view a bailout no longer as an unwelcome development but as a sigh of relief.
