- The success of the IMF review will cost the common man
In a negotiation which went into extra time, the IMF and Pakistan came to an agreement on how to proceed further. There has been an apparent agreement that Pakistan will take a number of measures by the coming 2020-2021 budget in order for the IMF to release the third tranche of $452 million, of the total $3 billion package. The prior actions that Pakistan has to take are all going to hurt the common man hard, even though the preconditionalities already met, such as the high interest rate and the rupee devaluation, have so far gutted jobs and growth, and sparked off an inflationary cycle made only worse by the recent wheat and sugar shortages. However, the PTI government has no real choice but to take the political hit from the steps it must take to satisfy the IMF, as the alternative of default and getting off the IMF package cold turkey, is unthinkable.
While obtaining a rollover of Chinese CPEC loans may not have a direct impact on the ordinary man, the fiscal adjustment plan, which actually means a hike in taxes, and the hike in gas and electricity tariffs, will. The IMF team stuck to the reduction it had made in the revenue collection target from Rs 5.55 trillion to Rs 5.238 trillion. The revenue target, even though revised downward, is not on track towards being met, with the collection so far indicating that the final figure might be about Rs 4.46 trillion, a shortfall of about Rs 768 billion. Pakistan had asked for a much larger reduction, but that was not agreed, and thus room remains for Pakistan being wrenched off the programme if it does not fulfil this target.
Pakistan should have clarified the issues it did during the current review at the time of making the original agreement. Even though the IMF got Pakistan to sack its Finance Minister and bring on board a World Bank man as PM’s Finance Adviser, it seems the IMF was unable to put in place an agreement that could be implemented. Now there is arising the possibility that even though its top economic managers are more or less picked by the IMF, Pakistan may not be able to meet the programme’s targets.