On September 2, the International Monetary Fund (IMF) released a report on the revival of its financial assistance program, the Extended Fund Facility (EFF), to Pakistan. The report – call, a disclosure – mentioned that Pakistan’s previous government not only repudiated the agreed conditions but also reversed several key commitments without the consent of the IMF. For these two reasons, the report justifies the imposition of eight more conditions on Pakistan, besides giving fresh deadlines to meet the action that remained unimplemented.
The report talks about the financial indiscipline of the government led by the Pakistan Tehreke Insaf (PTI), which shied away from implementing the EFF after the completion of the sixth review last November. To put it plainly, the report is not only a charge sheet against Pakistan’s willful aberrations but also suggests penances to rectify past mistakes.
The report says that, in late February 2022, the PTI-led government took measures which led to less revenue collection and higher spending, in violation of commitments to fiscal discipline made earlier with the IMF in the same year. For instance, the government granted a 4-month relief package to people. The package was untargeted and meant for reducing petrol and diesel prices through a generous subsidy and setting fuel taxes at zero taxation. Second, the government lowered electricity tariffs by Rupees 5 per kWh for almost all households and commercial consumers. Third, the government offered tax exemptions and a tax amnesty scheme. Fourth, the government deferred the rise in the regular electricity tariff. Fifth, the government raised its expenditures by increasing wages, and pensions and by offering additional subsidies on food. Consequently, for the current financial year, the fiscal deficit mounted by more than 1.5 per cent of GDP, which missed the end-June fiscal target by a wide margin.
The report is not only a charge sheet against Pakistan’s willful aberrations but also suggests penances to rectify past mistakes.
What the report has not mentioned are the sufferers of the financial disorderliness practised deliberately by the PTI-led government. The victims were the people of Pakistan. They were given short-term relief at the cost of heavy penalties afterwards. Unfortunately, people’s ignorance was turned against them with impunity. Nevertheless, the report acknowledges that after improving the financial discipline, the incumbent government may face unrest in the streets.
Is it believable that a government could resort to violating an agreement of financial assistance, knowing that the violation would cost the people gravely? It is unimaginable, unbelievable. A government cannot stoop so low as to augment its credibility by jeopardizing the lasting interests of the people. It is nothing but a sheer criminal act. The reason was simple. The PTI-led government knew that after four months, it would not be in the corridors of power and that the next political or administrative set-up would bore the brunt of the decisions reversing, which would render the set-up de-popularized in the sight of the people.
It is known that in the run-up to the general elections of 2018, the PTI claimed to have secured the expertise of more than one dozen financial experts to run the country. Some detractors say that the number of experts announced was two hundred, who could turn around the country’s destiny for the better. The gullible masses believed in the claim, so much so that Pakistan’s prime intelligence agency, which was supporting the PTI, also got engulfed by the claim. What came out after the end of the elections was the genius of Asad Umar, who was shorn of any experience in the financial management of even a province. As the Federal Minister for Finance, his sole expertise was using quotations from the books of Indian (economics) Nobel Laureate, Amartya Kumar Sen.
Umar could not replicate Sen’s ideas and slackened the economy in just eight months (from August 2018 to April 2019). The quick devaluation of the rupee reflected acutely on the financial health of the country. The masses kept waiting for the stealth team of economic experts but to no avail. Even the prime intelligence agency failed to produce any such band. The point is simple: officers running the intelligence agency carried the level of intelligence of the laymen in the streets. Sentimentalism and parochialism blinded both of them. Both were the victims of political gimmickry, and hence both were deceived and disillusioned.
The induced nose dive affected the popularity of the PTI badly. Jahangir Khan Tareen, who had assembled elected members in his aeroplane to swell the PTI’s ranks with elected members, was the first PTI member to react to the economic slowdown. Consequently, Umar was removed. The barring initiated a war of attrition within the PTI, ending in the eventual exclusion of Tareen from the party. Throughout its stint in power, the PTI kept on struggling with how to maintain its popularity among the masses in the face of rising inflation. The PTI-led government procured US$ 52 billion in loans to sustain the economy; even then the party had to violate the IMF’s conditions in February this year.
On August 31, while hearing a Contempt of Court case, Islamabad High Court’s Chief Justice Athar Minallah explained the reason for opening the court on the late night of April 9. He said that it happened to avert any chance of martial law, as the one imposed on October 12, 1999. Perhaps, Justice Minallah miscalculated the situation. April 9 was not October 12. On April 9, the country was sliding down the track of financial bankruptcy by violating the agreement with the IMF. It was a planted plunge. The army was not in a position to take the reins of the country in its hands, under whatever version of martial law, to administer the country financially. Similarly, the higher judiciary, which was once amenable to imposing a judicial martial law, was also reluctant to co-opt. The reason was gigantic financial challenges. The results would have been devastating for both the army and the judiciary.
In short, the IMF’s disclosure is a case study of the way a political government sabotages the politico-economic prospects of a successive government, even at the cost of harming national interests.
The writer can be reached at qaisarrashid @yahoo.com