The only surprise in the IMF team’s surprise visit to Pakistan this week was that it took the trouble to jolt the government in person instead of simply warning, as in the last EFF, that it will pull the plug on the facility if the government keeps missing its benchmarks.
Let’s not forget that it did just that when the Imran Khan government went off script and cut petrol and electricity prices in early 2022.
The gambit failed because it didn’t ward off the no-confidence motion, but it got the EFF shut down, so-called friendly countries put off their loans and rollovers, and the rupee began its precipitous fall that triggered a historic crisis of confidence in the Pakistani economy.
It’s also no surprise that FBR is missing revenue targets right at the start of the programme. It could and would have succeeded if only the finance minister had put his muscle where his mouth was and actually taxed the biggest and best-connected sectors of the economy that have eaten off the fat of the land since forever and never paid their fair share of taxes only because of their proximity to power and/or sheer nuisance value.
That’s how it’s been in this Islamic Republic and that’s how it’ll be; and the banker-finance minister schooled in the cold calculus of financial markets could only make tall claims and then eat his words at budget time even as the country risks nothing less that sovereign default if the bailout facility breaks down.
Now, after barely managing to secure the EFF, revenue collection is well below target from the first month, the epic, embarrassing failure to privatise PIA shows what’s in store for other SOEs – another core IMF condition, the circular debt is rising so fast that Nepra is considering legal action against Discos (becoming the laughing stock of the world), the Tajir Dost Scheme fell flat on its face and, according to the finance minister’s own admission, our lender of last resort friendly countries – China, the UAE, KSA – are no longer willing to extend endless deposits and/or rollovers.
That’s not all.
Everybody except government-paid private economists is revising this fiscal’s expected growth rate down, below 3 percent, which means there’ll be even less revenue collection going forward.
It’s been reported that the IMF team offered the government the same advice that Business Recorder editorials have been suggesting all year, that the government cut its own needless expenditures, especially 25 percent pay rise for its employees while the private sector is struggling to claw out of years of historic inflation, unemployment, pay cuts and tax hikes.
But it will never happen.
Instead, you can bet that they’ll continue to cut the development budget, driving growth and revenue collection even lower and resorting to more indirect taxes and mini budgets to bridge the gap; milking more and more from the same tiny minority that is unable to evade the tax net.
Yet there’s only so long this circus can go on. Everybody also knows that FBR will not be able to keep pace with revenue targets and the Fund will not send teams to issue warnings endlessly. And now we also know that friendly country bailouts will not come.
Then there’s the insurgency, constantly gathering momentum once again and delivering the kiss of death to any prospect of attracting substantial foreign investment; especially since the talk of cutting red tape and facilitating one-window operations never got off the ground.
So no progress on the FDI front is no surprise either, just like revenue collection, privatisation, taxation, and all other reforms, conditions and benchmarks promised in return for the bailout. History will remember how the government, so divorced from reality, showered itself with perks and privileges as the country sleepwalked into default. And, in hindsight, that will not be surprising either.
Copyright Business Recorder, 2024
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