The prospects of a mini-budget are no longer as immediate as seemed likely during the IMF review team visit, but with the Staff-Level Agreement that has now been reached, minibudget fears cannot be ruled out. Pakistan’s appeals for a reduction in the revenue collection target because of the recent flood damage, has not been accepted, and Pakistan remains committed to pre-flood targets, and pre-flood predictions and forecasts of things like growth, revenue collection, and inflation, which would all be affected by the flooding. Another issue which the IMF raised was that the Governance and Corruption Assessment Diagnosis report be released by November.
Pakistan had claimed economic losses of 681 billion, while the Fund said that the losses were Rs 585 billion. Even if the higher figure was accepted, it said, revision of targets would not be justified. Meanwhile as part of its effort to identify risk factors in the economy, it conducted in February a Governance and Corruption Assessment Diagnosis covering fiscal governance, central bank operations, financial sector oversight, market regulation, the rule of law, and Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT). In short, from simply deciding how the economy is run, the IMF got into the business of deciding how the country is governed. This expands the scope of the IMF’s intervention in Pakistan’s affairs to its governance, over and above the intrusiveness it has shown in economic management. As the economy determines governance, it already interferes. The most recent example is how flood relief has been tied to fiscal discipline, and the government thus prevented from providing the succour that the people need. While the government has been fulfilling the IMF’s demands so far, it has been conceding it more and more sovereignty. That cannot be right when the IMF is an organisation with an Indian Deputy Managing Director, who frequently meets Prime Minister Narendra Modi as an Indian who has made it abroad.
The main question the government must face is whether it will shuck off the need for IMF programmes this time, or will it find yet again that it has no choice but to go to it if it wants to retain access to the money markets. Are the economists at the IMF so bad that their solutions perpetuate the cycle of poverty? Or is that what they are supposed to do?
