ISLAMABAD: Pakistan Tehreek-i-Insaf (PTI) on Friday welcomed $3 billion IMF Standby Arrangement (SBA) for Pakistan and its commitment to support “national elections in Fall 2023” and to anchor the economy during the transition to the new government because only free and fair elections would be crucial to reduce political uncertainty and build confidence in the economy.
In a white paper issued on the economic performance of the PDM government, the PTI warned against “any attempts to delay or sabotage the elections”, saying that any such bid will create further hurdles in the way of stabilizing the economy and financial support from the international development partners.
The PTI white paper said that IMF report acknowledged that the PTI leadership support has paved the way for the IMF SBA and led to the Board’s approval.
“As the largest national party in Pakistan, we will always support actions for the benefit of the country and the welfare of the people, despite our strong apprehensions about the fascist actions of the PDM government against the citizens and political opponents,” it added.
The PTI white paper showed that the IMF report acknowledged the gains made under the Imran Khan-led government.
“Following the program approval in July 2019, the authorities’ decisive policy implementation started to reverse Pakistan’s large imbalances’ left by the PMLN government in 2018. It was said that IMF staff notes that under the PML-N government the ‘misaligned economic policies—including large fiscal deficits, loose monetary policy, and defense of an overvalued exchange rate— eroded macroeconomic stability, increased external and public debt, and depleted international reserves,” the white paper added.
The white paper said that IMF staff once again highlighted the success of the PTI government in managing the COVID pandemic. IMF report stated that ‘the authorities’ policies proved critical in supporting the economy and saving lives and livelihoods’ from the ‘severe pandemic shock’.
The successes under the PTI government listed by the IMF staff report include: Independence of the SBP; Market based exchange rate; Ending the flow of circular debt; Expansion of the social protection under the PM Ehsaas program and exit from the FATF grey list.
The IMF report is a charge sheet against the disastrous economic policies of the PDM regime, which sky rocketed inflation and stalled the growth. It was said that according to the IMF report, the ‘economy took a tumble in FY23 amid worsening domestic and external conditions, stringent import payment restrictions, and floods’.
“IMF estimates that GDP growth would decline 0.5% in FY2023, against government projection of 0.3% growth as data in recent months has ‘disappointed’ with LSM activity output contracting by 9.4% ‘amid frequent announcements of temporary plant shutdowns due to the inability to import machinery and intermediate inputs in a timely manner’,” it added.
Moreover, IMF also pointed out that ‘consumer and business confidence have weakened sharply’ due to ‘speculation in the media about a possible sovereign debt default’. The PDM government team issued frequent ‘public statements about a possible debt restructuring causing market turmoil and a spike in sovereign spreads’.
Under the PDM government ‘inflation has continued to rise due to the regressive import restrictions ‘shortages placed upward pressure on prices’, hurting especially the poor’ with ‘headline inflation reaching 38% in May 2023’ compared to 12.7% (March 2022) under PTI government. IMF notes that ‘despite the mounting pressures, actions by the policy makers lacked clarity’ leading to runaway inflation.
It was stated that Finance Minister Dar’s obsession with manipulating the exchange rate led to a sharp decline in SBP reserves and ‘exacerbated the scarcity of dollars, allowed the FX black market to grow and caused disruptions in the timely import of key inputs for domestic production and exports’, resultantly, ‘sovereign bond spreads tightened to above 3,500 bps, and Fitch and Moody’s revised their sovereign rating to CCC- and Caa3, respectively’.
Similarly, the IMF staff noted that ‘fiscal shortfall deepened in FY23’ due to ‘deteriorating revenue and unbudgeted expenditure’. Slow progress on structural reforms led to significant ‘underperformance’ in power sector, ‘sending circular debt stock to a new historical high of PRs 2.5 trillion (3 percent of GDP)’. Under the PDM regime ‘CD flow overruns of PRs 387 billion (0.5 percent of GDP)’ were primarily due to ‘policy slippages mostly from new unbudgeted, untargeted energy subsidies’.
The PTI leadership sees the IMF SBA as an opportunity to protect the weak and vulnerable citizens that have been burdened by record high inflation under the PDM regime. The gains from economic stability must be passed on to the citizens and tax policy must seek to address the weak compliance by FBR instead of burdening existing tax payers.
“We note with concern that several of the reforms taken by the PTI government have been reversed and stalled. Key reforms initiated under PTI including retail sector POS, Track & Trace system for big industries, and Single Window customs facility have all been slowed down deliberately, it was added. More than 43 million potential taxpayers identified by FBR have not been targeted while the government is busy imposing regressive tax measures on public including raising GST tax rates, unleashing unprecedented inflation on the masses,” it added.
It was said that kitchen expenditures especially of poorest households have increased more sharply by 45% under the PDM regime, resultantly cost of living was increased alarmingly with millions of households falling below the poverty line.
The white paper reads: “All pro-poor expenditures initiated by the PTI government including Sehat cards, Ehsaas ration schemes, langar & panagahs have been shut down. Under the PTI government we scaled up the PM EHSAAS program and during COVID we provided cash assistance to over 15 million households (nearly 45% of total population). On top of this the government has provided free of cost vaccination to over 130 million citizens against COVID.”
It was said that today, despite the increase in budget allocations only 7 million households are being provided assistance despite massive inflation and rising unemployment and poverty.
The ‘inclusive’ or bottom-up approach taken by the PTI government entailed providing incentives to those middle-income households, small farmers, youth, women and entrepreneurs that are marginalized in the current system of trickle-down growth. Towards this end the Low Cost Housing program Mera Pakistan Mera Ghar (MPMG) and the Kamyab Pakistan program (KPP) were a huge success. According to the SBP, over Rs 366 billion has been disbursed under the low cost housing MPMG program, benefitting more than 70,000 first time home buyers across Pakistan.
“The KPP of interest free loans promises to uplift incomes and livelihoods of millions of low and middle income households. These are households that are mostly unbanked, have no access to credit and lack resources to undertake productive economic activity. Unfortunately, under the PDM regime millions of youth have now been deprived of these programs,” the white paper concluded.
