Daily Times

By the look of things, the IMF is back with policies that will either make or break the economy. Earlier this month, the finance ministry was going on a spree over success at salvaging a $6 billion deal. After all, the third tranche of the loan secured to cope with cosmic account deficits was lying suspended for the last year-and-a-half. However, Dr Hafeez Sheikh’s high spirits about “good news about the country’s economy pouring in from all four corners,” does not resonate much with the public considering stringent conditions coming along as hidden baggage. To appease the board, Islamabad is all set to shut the doors on corporate tax exemptions and green-light automatic power tariff increases.

Before jumping to conclusions, not all requirements can be written off as bad. Improving the tax collection is a much-needed reform that holds the key to help Pakistan get out of the vicious cycle of account deficits. Very few people file income tax returns in the country (around three million in 2019). A large number of those–almost always–find some loophole in the cumbersome and unfair tax system to their advantage. Last December’s FBR report had predicted collection lagging behind the target of Rs 4.96 trillion. A similar gap of Rs 300 billion between targeted and expected tax collection was projected by the IMF. Going by the FBR’s estimate of tax exemptions (Rs 1.15 trillion), such generous leeways can, under no circumstances, be allowed to continue in a cash-strapped country like Pakistan. IMF programme or no IMF programme, we have to do something about the top one per cent and its never-ending demands to “do more.” If implementing these reforms can actually generate a revenue of Rs 140 billion every year, we should spend no time in sending the Ponzi schemes to hell in a handbasket.

However, the power tariff hikes would not sit well with the rest of the country and would probably lead to greater alienation of PM Khan from his electoral base. An increase of Rs 5.36 is bound to wreak havoc upon the catastrophic inflationary spiral. The rate of inflation has already registered a substantial increase to 8.7 per cent. Pakistanis would have to brace round after round of headline numbers in the coming months. Adding fuel to this fire is the announcement of around a nine per cent increase in wheat support price, which is being said to raise the overall inflation by up to three per cent.

The very fact that the government did not even wait for the National Assembly to take up amendments to the NEPRA law raises a pertinent question: what is behind this hasty legislation? Why is there a call for more autonomy for the State Bank of Pakistan? Exposing our classified data to international fora (as and when desired) would fuel a backlash. Quite an expected act since our confidentiality will be going for a six!

Surely, we have had more than our fair share of positive economic indicators to make a compelling case to the executive board. Moody’s has predicted a growth forecast of one per cent and there has been a 9.1 per cent recovery in the manufacturing sector. Exports have risen to the tune of $16.3 billion, while a surplus primary balance is touching Rs 416 billion. Yet, the IMF is still determined to inflict pain on the masses The last six months have brought hard-won gains to Pakistan’s economy. It would be extremely hard to continue on this path if people are once again asked to bear the brunt of harsh adjustments. Let’s just hope Islamabad takes a deep look at these loose ends so that reforms and welfare go hand-in-hand. *