Daily Times

It turns out that the IMF’s account of the state of the economy, and also of the just-resumed EFF (Extended Fund Facility), is pretty different from the government’s version. And some of the things that Finance Minister Shaukat Tarin said, like he actually got the Fund to back down from some of its stiff demands about more income tax, power tariffs, etc, were just not true. Or that the prior conditions were targeted only at the super-rich. In its report released on Friday the Fund announced six more conditions for Pakistan, which include increasing individual income tax rates as well as power tariffs; something which the government must have known when the finance minister was making misleading statements.

It’s also true, as feared often in this space, that IMF is very unhappy with the present fiscal year’s budget because it clearly “departed from EFF objectives and contributed to rapidly increasing macroeconomic vulnerabilities”. Back then, when the new finance minister presented his first budget, he assured the nation that the sudden turn to expansionary fiscal policy would not be reversed and there would be no need for a mini-budget because he’d “make the IMF understand the government’s point of view”. Since none of that turned out to be true, and the economy is in for further tightening of fiscal policy at a time when jobs and incomes are low and prices are very high, the new finance team’s policies don’t exactly seem to be working out quite as expected.

It’s not just that the road to the next budget has just become more difficult for the government, it’s also that now people feel upset because of the lack of transparency and misguidance from the finance ministry. A lot of businesses banked on the incentives and subsidies in the budget to make new investments and book new orders. But now policies are being reversed mid-way, which will surely result in losses for which official miscommunication, more than anything else, is responsible.

The government must now explain how it will provide a cushion to the working classes and also why it wasn’t straight forward about IMF conditions with them. *