Minister of State for Finance and Revenue, Dr Aisha Ghaus Pasha, while addressing an event at the Lahore Chamber of Commerce and Industry this week, made some honest disclosures, notably: “We are in an IMF programme and the IMF says first get your house in order.” According to her, “these things cannot go on like this for long.”
The minister added that the country is not only facing an economic crisis but our society is also suffering from polarisation and that our spending is higher than our income, exports are low and imports are high, the volume of remittances is more than $ 30 billion but tax revenue is not increasing. All of these are red flags for any economy - specially for an economy struggling to remain on its feet.
In the same breath, though somewhat contradictory to her observations on state of the economy, she claimed that Pakistan is out of the crisis now, adding that Pakistan was in a crisis a few months ago.
The crux of her message is that the IMF has reprimanded the government by asking the latter to bring its house in order and her admission that “these things cannot go on like this for long.”
The question is has the IMF ever acted sincerely and forcefully to make it mandatory for the government to bring its house in order in order to avail the IMF loan? Moreover, has the ruling coalition ever recognised and felt the compulsion to bring its house in order? The answers to these questions will be in the negative. In other words, neither has acted sincerely. Had the IMF held the successive governments accountable the IMF programme would not have been the perpetual destiny of this nation.
The IMF has condoned and overlooked many shortfalls of successive governments, programme after programme - some of them being major structural defaults on part of Pakistan as the nation sank from one low to another in state and economic governance.
Restructuring and privatisation of loss-making public sector enterprises (PSEs) has been the key condition of all IMF programmes since 2008. It was conveniently sidelined by successive governments of PPP (Pakistan People’s Party), PML-N (Pakistan Muslim League-Nawaz), PTI (Pakistan Tehreek-e-Insaf) and now by the incumbent government of Pakistan Democratic Movement (PDM) led by PML-N. Governments cover up these losses through subsidies at public expense.
Same holds true regarding the IMF conditions on restructuring of the energy sector of the country, notably, the restructuring and privatisation of loss-making power generation and distribution companies in the public sector. None of these three governments restructured or privatised the sector nor did this constant default invite any serious reprimand from the IMF. The mounting circular debt is the consequence of this default.
The losses emerging out of non-performing PSEs, power generation and distribution companies in the public sector and the circular debt arising out of it are severely bleeding the national economy since long. That is why the nation always remains locked in an IMF programme.
The IMF, in its current revived programme, prevailed on the government to do away with all subsidies as a non-negotiable conditionality. The incumbent government succumbed to the IMF’s pressure and signed on the dotted line obligingly. This resulted in massive rise in inflation, petrol prices and electricity tariffs. The brunt of this was felt by the lower and middle income groups, the trade and industry in the country.
Once again, an easy way out both for the IMF and the government was found to recover the impact of subsidies from the public, whereas, the root cause of it is the loss-making PSEs and non-performing public utility sector that have resulted in mounting circular debt. Consequently, the government’s incompetence is neither truly exposed by the IMF; nor did the Fund ever ask any government to put its house in order.
The rot of incompetence, misgovernance and corruption continues to flourish and shall continue to flourish as long as the bailout from the IMF is available and the patience of public tolerance does not snap.
The state minister’s observation that: “these things cannot go on like this for long” is a welcome admission of truth. Regrettably, however, hers is a passing statement because there is no mechanism on the ground nor any seriousness on part of the government to put its house in order. Things will go on like this; the only question is for how long?
Copyright Business Recorder, 2022
The writer is a former President, Overseas Investors Chamber of Commerce and Industry
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