State Bank Governor Yaseen Anwar has let the cat out of the bag by disclosing that the government is keeping the lamps burning by printing notes and taking loans from the State Bank. Talking to an American newspaper on Tuesday, Mr Anwar said that the government had borrowed Rs 442 billion this fiscal year, money which he could not refuse, because he lacked the autonomy, as he said, to bounce government cheques. However, the solutions he presented are equally unpalatable for the hard-pressed people of Pakistan: to pay more taxes, or go to the IMF. The question of paying more taxes would mean burdening the already hard-pressed people, who have not only been battered by inflation, but who are also suffering the effects of electricity shortages in the midst of summer. More taxes would also mean going into the coming general election as the government that has just soaked the poor. The government also cannot avoid the comparison with plutocrats who do not pay taxes, because their status as legislators allows them to avoid taxes on their agricultural incomes. Going to the IMF would be made difficult alone by the global crisis, with the Greek debt crisis an eye opening example of just how easy it will be to ask for money. Then there is the problem of the IMF acting as an enforcer for the US at a time when US policies are highly unpopular amongst the Pakistani people. Instalments for the recent, prematurely concluded, IMF programme, already constitute a burden on the economy, and another programme, would mean more burdens in the near term.
The government must not ignore what has been said by the Governor of the State Bank. This is not the only Governor to have made this particular criticism of the government. So have his predecessors, two of whom bowed out well before time. This particular Governor is a State Bank insider, and thus one who has spent his entire working life on the government’s side, where he firmly remains. What he says should not be met by the government as mere carping, but a clarion call to fundamental reform.