By Sardar Khan Niazi
Pakistan is hoping to end the deadlock when the International Monetary Fund (IMF) will release a $1.1bn loan, which is part of the $7bn loan program the country entered in 2019. It is also seeking immediate financial assistance from its close bilateral partners amid the economic crisis.
In August last year, the IMF released a tranche of $1.17bn, but the next round of funding has been in the doldrums as Pakistan has so far not agreed to the lender’s various conditions. Experts paint a gloomy picture saying the government must reconsider its priorities from finding short-term solutions to more sustainable reforms.
It is worrying to see the plight of the poor amid the continued fall of Pakistan’s economy. They are not getting the policy attention they deserve. These people have become poor in the wake of the ongoing economic crisis and have not recovered from it since. There has been no increase in the average income of the poor. The insanely high cost of living has pushed the poor now having to use most of their income and savings to pay for food and other essentials.
They cry when visiting markets because they do not have sufficient money to pay for necessities. The steps taken by the authorities have neither brought relief to poor households nor reduced the yawning rich-poor income gap.
The question is how long it will take our policymakers to address the plight of the poor, ensure support to increase their income, improve their situation in the upcoming budget, and bring down food prices by reining in unscrupulous syndicates.
The government also needs to stop the culture of increasing the tax-tariff burden on the poor and shift it more onto the rich. It must curb rising inequality. There is no denying that our dear homeland is going through a crippling cost-of-living crisis, and the poor are suffering the most because of it. We need proper governance and pro-poor reforms to ride out this crisis.
Reforms for getting the IMF prescription should not harm disadvantaged groups. There is a need for the government to balance economic reforms some of which are preconditions for accessing the IMF loan.
The household income and expenditure survey demonstrates inequality is indeed rising in the country. The ongoing global and domestic economic challenges, and the obligation to meet IMF conditions through various spending cuts, could lead to faster inequality growth.
Numerous studies show that inequality tends to rise during IMF programs or because of IMF conditions. Therefore, it is crucial to adjust its conditions in a way that can contain inequality.
Allowing specialized and subsidized credit schemes for the people involved in different enterprises while maintaining flexible interest rates as per the IMF recommendations can help in this regard. Moreover, there is a need for reducing tax exemptions to meet loan conditions. It should take place in a way that does not hurt small and medium enterprises.
How the government plans and implements the upcoming national budget will also be a big factor, as far as inequality is concerned. Allocation for disadvantaged groups should not suffer because of the government’s fiscal constraints. The government should ensure that much of its limited resources are to meet the needs of these groups. It also needs to ensure greater accountability and transparency in its budgetary allocations and delivery to reduce corruption, which always hits deprived groups the hardest, while benefitting special interest groups the most.
There are many tax evaders and defaulters in the country. Taking action against them, however difficult that may seem, is necessary for any reform to be sustainable. The current situation deserves appropriate policy attention. The government should draw a clearer roadmap for its economic strategy.