IMF plans

The worst may not be over

Is the country to be asked to make greater sacrifices, more than usual? The government’s anxiety to pass the last IMF review has led it to agree to 11 new conditions, including an agreement not to make any budgetary provision that will entail growth. It is going to be bad enough that the government has given the IMF final approval of the budget. That could be problematic, but it has happened before. However, the mechanism is not clear. Sharing the budget proposals with the IMF beforehand could compromise budget secrecy, especially as the proposals have to receive Cabinet approval before being presented to the National Assembly. Then there is the mechanism of the government presenting the budget of its dreams, and later making changes just before its passage, Everyone would know who was responsible for the changes, and it would allow the government to preen itself on how people-friendly it was, and what wonderful things it would have done, had it not been for the big, bad IMF.

Perceptions aside, the substance of the IMF’s new conditions do not merely deal with the Budget. They are also about the tax exemptions granted to Special Technology Zones and Special Economic Zones, which the IMF wants written out of the enabling legislation for the STZs and SEZs. Oh, nd the IMF wants power and gas tariff hikes to continue.

It is easy enough to reject the IMF conditions out of hand, but some of them seem based on common sense. One example is the Federal Board of Revenue being compelled to centralize its audit case selection process by June, and adopt a standardized audit manual, a published audit policy, and a comprehensive risk and integrity register. The audit policy must mandate follow-up of all high-risk cases identified through the risk management system. These are not measures that the IMF should have had to impose on the CBR. The purpose of an audit is to identify tax evasion and theft, but it is extremely intrusive. Unfortunately, even the threat is used to extract bribes. A more transparent mechanism, such as the IMF has demanded, would help raise revenue.

That seems to be the IMF’s main goal: raising revenue. The problem with the IMF’s complacency is that it is not showing signs of departure. The programme, even if completed successfully, does not avert the country going onto a further programme. This should lead to some thinking. Why does the country not get out of the IMF’s toils? Especially when the prescriptions have been followed as carefully as this government has done. What if the IMF has got its economics wrong?