- It began much earlier than envisaged
In an article this scribe in October 2019, the incumbent government was cautioned not to get hooked on to International Monetary Fund (IMF) for assistance for its dire financial needs. The reasons quoted therein for not falling into the IMF trap were: (1) Going to the IMF for assistance would mean complete acceptance of IMF’s inordinately abrasive terms and conditions by Pakistan (2) IMF is known among its borrowing member countries as a martinet; the borrowing countries have no option but to agree and strictly abide by its extremely harsh terms and conditions set forth for extending loans to them.
It was also stated that while seeking a bailout package from the IMF we should not be oblivious of the stark reality that more than the primary objective of its creation, this international financial organization (the IMF) is functioning under immense influence by the powers that be, particularly the USA. The USA is the largest contributor to the IMF and has 17.68 per cent of voting rights in its major decisions. In view of this, the USA, in particular, and the other sponsors of the IMF, in general, wouldn’t find a better opportunity to make Pakistan to its knees, and compel it to come to terms on all issues crucial to them.
The IMF, as predicted, has now opened up brashly. In fact, it has unveiled its real face much earlier than could be envisaged. As reported last week, the IMF delegation persisted on ‘immediate measures’ for reducing the revenue-expenditure gap and fixing the cash bleeding energy sector. It refused to grant Pakistan’s request to further revise the stringent revenue target (Rs 5, 238 billion) it has set for Pakistan for the ongoing fiscal year.
Official sources confirmed the Federal Board of Revenue (FBR) desired a further reduction in its revised target of Rs. 5, 238 billion, but the IMF preferred to see the plan aimed at removing distortions and expanding narrowed tax base on a permanent basis. The IMF, it is believed, insisted that, if the need arises, the government must take measures to correct the situation halfway instead of waiting for a worsening of the situation by the next fiscal year.
The IMF team came and left without signing the staff level agreement which, if inked, would have led to the release of the third tranche of $452 million of the $6 billion Extended Fund Facility Programme. Presumably, it happened so owing to the government’s inability to take ‘prior actions’ by placing a viable fiscal adjustment plan, hiking gas and power tariffs and ensuring the rollover of Chinese loans. According to media reports, Pakistan has categorically stated that it would not increase the gas and power tariffs, whatever the consequences. What would be the ramifications of this decision on IMF demands wouldn’t be difficult to gauge. Whatsoever the end result of this mutually fractious tug-of-war, it would be pretty easy to predict that it is going to make things worse for Pakistan in times to come
On the issue of revenue generation it was reported that a couple of months ago the Fund’s Executive Board allowed the FBR to reduce the target from Rs 5.5 trillion to Rs 5.238 trillion. If the Fund grants Pakistan’s request for further reduction in the revenue generation target, a question will be raised on the IMF team’s credibility, and the IMF certainly wouldn’t like to take the blame on itself.
All the issues enunciated above are unambiguously crucial and challenging for the incumbent government. However, the most perturbing and inconceivable posture taken by the IMF is its blatantly asking Pakistan “to reduce its trade and commerce reliance on Beijing”, and look for other international options by signing free trade agreements with other countries too. Everyone knew this was going to come, and it has finally come. In fact, it has come much earlier than was expected. This issue, if looked at critically, exposes the IMF’s intention to give a serious blow to the ongoing multi-billion dollar Pak-China CPEC mega-project; a project that has been forecast to bring a phenomenal economic boom not only to Pakistan but to the entire region. Those who keep a close eye on international politics are fully aware of the fact that the USA particularly and its steadfast cohort India have never been able to digest the very idea of this gargantuan joint venture project between Pakistan and its time-tested friend China, right from its inception.
Exchange of pleasantries and bestowing flamboyant protocols by heads of governments to each other is always reciprocal, and are very much a part of standard universal diplomatic norms. Let us, therefore, not get carried away by the pleasantries exchanged and the outwardly amazing offer the US President Donald Trump had made during his meetings with Pakistan’s premier Imran Khan. During his first meeting held at the White House in Washington on 22 July 2019, Trump offered to mediate on the Kashmir issue between India and Pakistan, and in the second encounter held on the sidelines of the World Economic Forum (WEC) in Davos, on January 21, he renewed this offer. Yet again, while addressing a mammoth gathering at the Motera Cricket stadium in India on February 24, he reiterated his desire to mediate on the issue. Unfortunately, however, nothing tangible has come out of these offers so far. Contrary to all this, the Indian government, through a presidential decree issued on August 5, brazenly revoked Article 370 of India’s constitution, that guaranteed special rights to the Muslim-majority state.
In the earlier article, this scribe also explicitly cautioned the incumbent government was that the IMF’s stance on the issue of lending to Pakistan would predictably be extremely harsh, for two reasons: its stringent pecuniary policies, and its covert plan to retard Pakistan’s development projects, particularly CPEC.
The IMF team came and left without signing the staff level agreement which, if inked, would have led to the release of the third tranche of $452 million of the $6 billion Extended Fund Facility Programme. Presumably, it happened so owing to the government’s inability to take ‘prior actions’ by placing a viable fiscal adjustment plan, hiking gas and power tariffs and ensuring the rollover of Chinese loans. According to media reports, Pakistan has categorically stated that it would not increase the gas and power tariffs, whatever the consequences. What would be the ramifications of this decision on IMF demands wouldn’t be difficult to gauge. Whatsoever the end result of this mutually fractious tug-of-war, it would be pretty easy to predict that it is going to make things worse for Pakistan in times to come.