The IMF goes to work

The IMF is making sure that everything passes through it 

As the current Extended Fund Facility wind down to a close, the International Monetary Fund makes sure that the country’s second-last budget under it carries its stamp. More specifically, it is ensuring that it holds the government’s feet to the fire, and ensures that it obeys the conditions it has agreed to. This has meant agreeing to getting approval for between Rs 250 million and Rs 300 million in new taxes, as well as agreeing to raise the petroleum levy to 17.6 percent. It is presently a Rs 117,40 flat levy per litre on petrol, and Rs 42.60 on high-speed diesel. The government aims to impose a combined Rs 160 on both.

It is not the only effect the government will have on the automobile sector. The government is also preparing to make changes in the baggage import scheme, which it has already fiddled with. This is to be part of the changes that are to be made in the customs tariff regime. At this stage of the programme, it would be truly surprising if the IMF came up with something new. The nearest to that is the new scheme to tax retailers. So far, the government and the IMF have tried several schemes to tax the retailers, but to insufficient avail. The IMF remains convinced that there is huge potential in the retail sector for the kind of taxation which would secure its loan. It has targeted a primary surplus of Rs 2.881 trillion in the next fiscal year, and the overall deficit is to be kept at below 4 percent of the GDP.

These conditions were all agreed to. The problem is that while the IMF continues to suggest no measure to improve exports, which is the only way out of this debt trap, it has also added a blithe ignoring of the US-Israel-Iran conflict, even though its own report on Pakistan says that it will have to deal with the war’s economic headwinds. This once again raises the suspicion that the IMF people don’t know their economics. Or else, they have deliberately designed their programme so that Pakistan cannot escape from their toils. Apart from all else, escape from the IMF, and then potentially from the debt trap, means that the political control of those powers behins international financial institutions like the IMf would be weakened.