The wait-and-wait novelty

So, another week has passed and there’s still no update about the fate of the IMF bailout programme – except that the finance minister has shifted from giving approximate dates to dismissing questions with “talks are in an advanced stage”.

There’s also no news about the mandatory “external assistance from friendly countries”, the $2bn hole that rollovers from Saudi Arabia, the UAE and China were supposed to plug, which the finance minister claimed was secured weeks ago.

And nobody knows if the finance ministry or the state bank have realised that their smart idea of raising another $4bn from “international commercial banks”, later revealed to be the UAE banks, ran into a brick wall because those banks want an IMF deal first whereas we need their money, that too at exorbitant interest rates, to enable that deal.

What did become crystal clear over the past week, though, was that FBR (Federal Board of Revenue) missed its tax collection target for the first two months of the new fiscal by almost a hundred billion rupees.

And that promptly put a dampener on the other confirmed news that came out, that inflation finally dropped below 10pc – clocking in at 9.6pc in August, a 34-month low, though economists believe it to be 4-5pc higher – because the government is sure to bridge this gap by slapping more taxes on the middle- and lower-income classes.

And that will inflate bills and bite deeper into their real incomes, on top of the record inflation and unemployment of the last 2-3 years, leaving a government still celebrating the dip in inflation looking silly and divorced from reality.

That brings us to one more thing that did not become any clearer over the last seven or so days. There’s still no telling how the effort to tax traders will turn out.

This time last week they were about to go on strike, as always, to bully the government into backing off – a tactic that has worked for decades; why is why they have never really paid any direct taxes even as salaried classes have had their skin peeled off just to keep the government solvent enough to stay on a bailout facility.

Now, they’re threatening to strike again, indefinitely this time if that is what it takes, and it seems the government’s preferred strategy is to wait out their threats and strikes; which means they’re supposed to get tired of it one day and eventually start paying their fair share.

Even if this wait-and-wait strategy is the magic solution to this never-ending problem that no administration thought of before, it does not give a timeframe or the quantum of taxes to realistically expect from this bunch. And when FBR is failing to meet revenue targets right from the start of the fiscal year, even before the IMF program is signed, it is not going to impress the lender enough to soften its “upfront” conditions.

Interestingly, even as the government stays mum about the most pressing problem in the country’s history – all its machinations on the political and judicial fonts will amount to nothing if there’s a sovereign default and riots rip the country into pieces, after all –enough information and speculation have crept into the foreign press to put two and two together.

It seems shockwaves in global markets, creeping credit-crunch recessions in the US and EU (remember 2008?), a subsequent oil glut amidst falling crude demand, and a real estate/shadow banking sector implosion in China have come together at the same time to compel the friendly countries we’re counting on for rollovers to tell Islamabad to take a hike, at least for now.

The Chinese have been unhappy for a while because of missed payments, dishonoured contracts, bungling of currency swap agreements and the constant demand for rollovers. And the Arabs are having a hard time keeping a straight, benevolent face when they’re being forced to shift from their earlier, clearly stated position that any help or loans or rollovers would require Pakistan to be “on an active IMF programme”. Now it’s suddenly the other way round and they must cough up the money because our leaders wrecked the economy and brought us to the brink of default.

So, the clock ticks yet the government waits and waits. It waits for the rollovers just like it waits for traders to tire of their protests and line up to be taxed.

And it waits for the confirmation of the bailout which was first supposed to start, somehow, with the new financial year, then in August, then in September, and now “talks are in an advanced state”.

Let’s see how many of our pressing problems this wait-and-wait novelty solves by this time next week.

Copyright Business Recorder, 2024