IMF Program and Economic Stability in Pakistan: IA Hashmi

 

The news of the expected approval of a seven billion dollar loan for Pakistan in the IMF meeting on September 25 is welcome. This is Pakistan's 24th IMF program so far, indicating that we have failed to implement the reforms required to correct our economic direction 23 times before. To get this bailout package, we have had to go to great lengths to get commercial financing of two billion dollars and a rollover of more than $16 billion from friendly countries. In this regard, China, Saudi Arabia and the United Arab Emirates have undoubtedly proved that they are true benefactors of Pakistan. However, it is also a fact that we have found ourselves mired in debt due to the mismanagement and political opportunism of our governments. The traditional administrative structure of our system of government has become a huge burden on the national exchequer. Even after the 18th Amendment, there are many ministries and departments in the federation which are not needed. Similarly, political recruitments have also caused huge financial losses to the government institutions, due to which the payment of pensions to the retired employees has now become a major challenge. For years, the lack of financial discipline at the government level and the policy of making economic decisions on political grounds have hollowed out the economic foundations of the country. Due to this indiscriminate wastage of national resources, we are unable to provide quality health and education facilities to our citizens. If difficult decisions are not taken politically and more time is wasted to change this situation, it will never be possible to get out of the debt trap.

The proposed program of IMF is definitely a temporary relief for us in a sense but history will never forgive us if this opportunity for self-improvement and economic reforms is wasted. In this regard, the government has already shown weakness by making political compromises to bring non-filers into the tax net, including retailers, real estate and agriculture sector. Apart from this, the reduction in government expenditure and the process of privatization of loss-making state-owned corporations is also slow, which shows that the government is just wasting time in this regard.

This behavior is disappointing in the sense that the government has already increased the tax burden on the salaried class and industry more than necessary to get $7 billion from the IMF. However, to get out of this crisis, there was a need to take steps to increase economic activities. More importantly, the focus was on increasing exports and providing competitive energy tariffs to the export industry, as well as improving the payment of refunds so that the capital shortage faced by the industry could be eliminated.

In addition, by increasing the tax rate on the salaried class, it will be difficult to achieve the goal of increasing economic activity, because if a large part of the income of the citizens is spent on paying taxes and meeting other necessities of life, then they will not have the purchasing power that is necessary to promote the national economy. In these circumstances, it will be difficult for the government to get direct investment from abroad, due to which we will remain economically dependent on international financial institutions.

The government should use this program of seven billion dollars received from the IMF to strengthen the economic base of the country. Currently, Pakistan's economy is ready for take-off, but political stability is indispensable for this. The main reason for this is that political instability in any country is considered to be the biggest obstacle in the way of economic development. The political parties should think that the conflict of their own interests and the protest and unrest arising out of it is not in any way beneficial for the country. The people of Pakistan are already bearing the burden of rising electricity and gas prices and a record 40% increase in tax rates to get loans from the IMF.

Although the people are facing financial difficulties due to these measures, it is also a fact that due to this, the financial condition of Pakistan has improved and its global credit rating has increased. 30 percent, petroleum product prices have come down by 15 to 20 percent and interest rates by 4.5 percent. In these circumstances, the production cost of the industry has also reduced to some extent, but still there is a need to further reduce the interest rate along with the reduction in the energy tariff to increase the economic activities so that the restoration of the industry can provide employment. Opportunities can be increased. This will also make it easier for the government to get foreign investment and friendly countries who want to see Pakistan financially stable will be able to invest in Pakistan with more confidence and start joint ventures instead of giving us loans.