IMF: delayed again?

Once again, the IMF review under the ongoing program has fallen into limbo. This has happened with every change in guard at the finance ministry. In the past, be it Shaukat Tarin or Miftah Ismail, each finance minister eventually was forced to agree to Fund’s terms. Dar doesn’t have a choice either. However, he had made big promises. Now, the country is suffering as a result.

The problem is that successive finance ministers (or broader government at the time) delays tough decision making demanded by IMF under structural adjustments. Ironically, the final impact borne by the public is often worse due to the delay. Will history repeat itself with Dar too?

The finance team is in the process of so-called negotiations on the revised macroeconomic framework. From sources close to the negotiation, the impression is that the finance ministry is no way near completion. There are issues on the basics. Neither on the numbers nor on the laws.The problem is not in the assumptions of the numbers, rather the numbers are not being presented. And if there is some data sharing, there lack in coherence.

The core issue is on the fiscal side. There are slippages from earlier agreed numbers. At one end, the government claims there is no excess expenditure due to the floods. However, on the other end, globally, the government is claiming high damages. Then the government attempts to provide blanket subsidies disguised as support to the flood victims – such as subsidies on fertilizer or not reigning in taxation on the energy sector. Clarity of the purpose is missing. And the plan to bridge the gaps is missing.

There are gaps in the revenues as well. Government is unable to collect enough from petroleum levy (PL) in non-taxes. The application of PL is low and then there is a decline in consumption of petroleum products. The need is to do more to reach anywhere close to the target. Dar made the mistake of reducing the PL on HSD right after assuming the finance minister position. Now, perhaps he must come up with higher PL; but may also have to impose GST (from 10-17%) on petrol and diesel. It is exact opposite of what he was aiming for. The story of Shaukat Tarin or Miftah (rather Shahbaz) was similar.

The government at any given point is not ready to take any pain, forgetting that it would be forced to make much bigger adjustment (more pain) later. Nothing is being achieved by this dilly dally. With every passing day, the macroeconomic situation is getting worse. The global crisis is huge. Everyone in the world is busy saving their skin, no one really cares for Pakistan. And why should they when Pakistani policymakers are no serious in their resolve. Bring IMF back and then expect help from friends. Not the other way round.

There is no clarity on either revenues or expenditure. The question is how the government will reach the committed targets. There are gaps everywhere and when people ask in the ministry of finance, the usual response is that Insha Allah the targets shall be met and IMF program shall be continued. How long can a nation live on Insha Allah without willingness of people responsible for doing what’s needed.