Policy clash

Clash over EVs shows how too many cooks spoil the broth

The current debate among government ministries and the IMF representative’s office illustrates how the policies it tries to impose can clash with each other, and how Pakistani policymakers have placed themselves right in the middle of a clash between two IMF programmes. It is no consolation to Pakistan that it has voluntarily obtained, with great effort, the two IMF programmes which are presently working against each other, and which are proving to make contradictory demands. At issue are the customs duties applicable to electric vehicle imports. On the one hand, under its package under the IMF Resilience and Sustainability Fund, it is supposed to encourage the adoption of EVs. That has been integrated into the Commerce Ministry’s auto policy, which covers the import of all vehicles. Under the IMF Extended Fund Facility, Pakistan has agreed to reduce its tariffs and allow a level playing field for all. Therein lies the clash within the IMF, and for which Pakistan has to pay the price by failing to comply with its commitments under one programme or the other.

One could blame the IMF for setting two contradictory goals, especially when it has linked the ESF package to a country being on another IMF package, to the extent that one team is sent for the review of both packages and it issues one report. Presumably, any contradictions that might arise would be resolved at that time. However, that should not remove the responsibility of thePakistan government to form a unified view. It is unseemly for the government to be involved in a dispute on this issue. Apart from the Finance and Commerce Ministries, the Industries Ministry is also involved, because it is the ministry in charge of the deletions programme, of which parts may receive nonconcessionary duties because they should be manufactured domestically.

Tariffs are supposed to afford local industry protection, and that is something the IMF opposes almost as much as subsidies. Too much protection carried on for too long can make manufacturers lazy, but there is no other way known of developing industry. One is forced to ask whether the IMF has designed its policies to block further industrialisation, and even to de-industrialize, as nascent local industry is knocked off its feet by a flood of cheap imports. Its policies seem designed to achieve this, even as they also spread confusion. The government must do what is good for the country, not the IMF.