IMF country head in Pakistan, Jeffrey Frank, said on Friday after talks with a Pakistani Finance Ministry team that there would be no rescheduling of loans by the IMF, nor any write-off. Even though he confirmed that there was no application, the review mission did share its estimates of ‘billions of dollars’ for Pakistan to meet its external financing needs and of a budgetary deficit of 7.5 percent of GDP. One of the main areas of concern he expressed was over energy, and there is no denying that energy shortages, by making oil imports expensive, and making it impossible to export manufactured goods, thus causing loss of jobs, are causing immense losses to the economy. This gloomy IMF forecast thus makes the case that Pakistan will duly have to turn to it, as it did before, seeking balance-of-payments support through a fresh loan. Mr Frank’s saying that this time Pakistan will have to make policy changes first, and then would have the loan disbursed is a sign of impatience with Pakistan not being able to fix it’s own mess. Previously, loans were first disbursed, and then conditionalities met. Now, it seems, those conditionalities must first be met before any disbursements are made.
Part of the reason that Shaukat Aziz, first as Finance Minister, and then as Prime Minister, managed to enter an IMF programme, and then bring it to an end, was the intelligent exercise of financial discipline. However, though legislation was passed placing a cap on the debt the government could incur, some matters were not dealt with, leaving gaps through which the IMF is now in a position to make demands. One of them is the need to balance the budget. This, in turn, has led to a closer look at the tax: GDP ratio, and to the tax exemptions behind it. One of the most misused exemptions has been the one on agriculture, but then, the IMF was not needed to defend it. Long before the IMF objected to it, it was noted that it would prove a loophole destructive of Pakistan’s economy. The IMF will get another opportunity to press for an electricity tariff hike. This display of anti-people policies will not be good for the government as it goes into the election, but is essential as a pragmatic measure to correct our unbalanced books.
The government will not be making any agreement with the IMF which will tie the hands of the government to be elected later this year. Pakistan should try harder to stand on its own feet, and stop relying on bailouts.