Innocuous as it may appear

Certain moves which appear to be quite innocuous in the beginning could turn out to be harmful in the long run for the economic management of the country. Frustrated with its efforts to convince the parliament about the need to impose a Reformed General Sales Tax (RGST) to meet an important conditionality under the Stand-By Arrangement (SBA), the government is reported to have decided to establish a direct interaction between an IMF mission and representatives of various parliamentary parties to sort out the matter.
According to reliable sources, the government, after failing to garner the required support for passing the enabling legislation, has informed the IMF regarding the political parties' tough stance on the matter, and requested the Fund staff to successfully persuade the political leadership on the RGST issue.
It may be mentioned that an IMF mission headed by Adnan Mazari is scheduled to visit Islamabad this week to restart negotiations on the stalled $11.3 billion package. Its last two tranches have been withheld by the IMF since May, 2010 due to non-fulfilment of certain performance criteria, including the imposition of RGST with effect from July 1, 2010.
In our view, anybody who is well aware of the current economic situation of the country, would appreciate the impatience of the government to keep the SBA programme on track, but its latest approach that seeks to directly involve the IMF staff to end the current impasse on the RGST in order to find a way out of the present crisis would, in no way, serve the long-term interest of the country.
In fact, such a move would suggest that we, as a nation, are not capable of making important economic decisions ourselves and also open a window for the outside agencies to play a greater role in reconciling divergent views. The irony is that such an initiative is not only likely to be interpreted as outside interference in the internal affairs of the country, but could tighten the present stand of various parties in the parliament to gain political mileage.
As such, the whole exercise could prove to be counterproductive. In fact, there are certain visible signs of such an outcome. According to an MNA of the MQM, the idea of a briefing by the IMF had not yet been conveyed to them, "however, it should be made clear that we stand our ground and our position on RGST has not changed."
A more hardened stance was expressed by the PML-Q by asking the government to focus on real issues and asserting that "if we have not been convinced by the Finance Minister then how can the IMF woo us to support the RGST. This is a foolish thought to get us through the IMF." A spokesman of the PML-N explained that "we have always said that government needs to plug corruption and reduce unproductive expenditures instead of going for any new taxation at this hour." Only the ANP seemed to continue with its old stance and did not seem to be unduly bothered by the briefing of outside experts.
In view of the above, the government needs to reappraise its approach to bring the opposition parties on board, regarding the adoption of necessary legislation on the RGST by the parliament. It must not set an unhealthy precedent by involving the IMF directly in the controversy but keep engaging itself with the opposition parties, impressing upon them the dire need to continue with the programme and ensuring that the imposition of the RGST will be in the long-term economic interests of the country.
Fortunately, it has initiated a meaningful dialogue with the PML-N and it would be useful to enlarge the scope of its coverage to other major parties in the parliament. A consensus on the issue would also ensure ownership of the programme by the country and its better chance to be successful.
While on the subject, we would also urge upon all the major political parties to establish economic think-tanks of their own, staffed by eminent economists, to come up with alternative but sound economic strategies to pull the country towards a better future. Such a course of action would raise the standard of debate by several notches and automatically reduce the role of outsiders in the economic decision-making of the country.