Pakistan and the IMF could not conclude on time the fourth review of the $6.7 billion bailout programme due to the IMF’s insistence on increasing power tariffs. To be perfectly honest, this is not the time to be increasing prices. The government is near collapse politically, this would just have been a nail in its coffin. PTI is already calling for civil disobedience, another excuse for a Pakistani not to pay taxes. Yet, the IMF will continue to give us loans, because it needs us not to default. The IMF also wants drastic changes in the State Bank of Pakistan Act aimed at giving autonomy to the institution. It was for the first time that both sides could not conclude the review within the agreed timeframe.
This week, former Governor of State Bank Shahid Kardar, wrote in an article that although the IMF did not presently appear to be in the mood to pull the plug, how long could this black comedy of numbers possibly continue? The FBR is dysfunctional and corrupt and inefficient. There are allegations against the finance ministry and Ishaq Dar for cooking numbers and presenting a rosy picture of the economy when there is none. Prices have been going up relentlessly, load shedding is waiting on Shahbaz Sharif to change his name, foreign exchange reserves have risen but on the back of one-off inflows and heavier borrowings, and the tax net is a tea-strainer, seriously limiting the budgetary options of the government. The burden will always be on the middle classes and salaried people who actually pay their bills and pay their taxes.
In the past three reviews, the IMF was soft on Pakistan despite our failure to meet the conditions of building foreign currency reserves, net domestic assets, and reduction in government borrowings from the State Bank. With future increases in the power tariffs, our exports will fail to compete in the international market, further deteriorating our foreign currency earning capacity. We will definitely see a hardening of the position of the IMF, and things may become serious by the end of the year.