Pakistan: IMF hardens stance

THE FRONTIER POST

Finance minister Dr Abdul Hafeez said a few months ago that Pakistan would not require a fresh bailout programme of the International Monetary Fund. But when the IMF mission is now in Pakistan, the government says it needs another such arrangement to remove difficulties of the fragile national economy. This economic plight owes largely to corruption in successive governments that could not achieve budgetary and other economic targets. The incumbent government would be more to blame that it did not deliver despite availing the IMF bailout package amounting to $11.3 billion in 2008 and addition of another $500 million to the exchequer from the US-led Coalition Support Fund late last year. Where has the money gone, is a pertinent question that the government must answer. This is in this background that the IMF now seems coagulating its stance if Islamabad made a formal request for another loan. The world body believes that Islamabad has done almost nothing to consolidate its macroeconomic management and taken no other steps committed when the government was availing off the earlier package. For example, it says that the government has not reformed its taxation regime, failed to bring reforms in general sales tax, took no initiative for internal resource mobilization in boosting revenues, did not withdraw subsidies and paid more or less no attention in overcoming power shortage which has now become number one crisis in Pakistan. The mission also says that the request of a future loan programme can be entertained only if the country’s political leadership and the forthcoming caretaker governments at the centre and in provinces give their consent. Even such an arrangement will be conditional to bringing about a radical change in economic strategy as losses incurred by government institutions substantiate the fact that current economic policies and priorities have failed. The IMF also understands that budget deficit has gone up due to the power sector’s line losses and theft. The deficit will now rise to 7.5 per cent of the GDP during the ongoing financial year against the government’s target of 4.7 per cent. Consequently, the economic growth will be around 3.5 per cent against the target of 4.2 per cent. The budget deficit has become a critical issue for several years and bridging this gap would need billions of dollars in revenue. Not only this Pakistan’s foreign exchange reserves have also fallen from $13.782 billion on week ending on January 11 to $9.3 billion earlier this week and this size of reserves is hardly enough to foot the imports bill for a maximum of three months. Another crisis seems looming large is that Pakistan has to repay around $1.7 billion to the IMF in the remaining five and half months this fiscal and another $3.4 billion in 2013-14 and this would further deplete the foreign exchange reserves leaving no other option than to approach the Fund for a fresh bailout package. What actually has marred Pakistan’s economic progress is all governments at least since Ayub Khan’s regime have not kept the national interest as the ultimate goal. Their economic policies and priorities have consistently been subject to political expediencies and vested interests. Looking around Asia, the example of several countries, including China, South Korea, Malaysia, Thailand, Vietnam and even South Asian countries like India, Bangladesh and Sri Lanka, would demonstrate that Pakistan stands nowhere in economic development in the continent. What irks more is that most of these countries got freedom much after this land of the pure did. One particular aspect which sufficiently proves how deep rooted corruption in our country is, as also pointed by the IMF, that no government has been able to overcome the chronic ill of power theft nor control system and power losses that are as high as 35 per cent against an internationally accepted standard of a maximum of 10 per cent. This is only because corruption has permeated in electricity companies like cancer. And since energy issue is the country’s core issue, such a huge loss cannot be condoned by any yardstick. Indeed it is now crucial that incumbent rulers should focus on internal resource mobilization, including reforming the hackneyed tax collecting system with an even-handed approach of taxing all those are eligible and are rolling in wealth, in addition to documentation of the national economy. But for the first time, for a change, the government should focus the interest of Pakistan and its 180 million people who are, for decades, hoping their miseries will be over one day.