What are our priorities?

The International Monetary Fund's (IMF) report on Pakistan's economy after its seventh review under the ongoing EFF arrangement is optimistic about macroeconomic stabilisation being well under way, and the threat of a crisis having receded significantly. Also, that significant 'further' economic progress is within the reach of Pakistan. Is that so?
According to the IMF, "authorities should be commended for attaining 'all' performance criteria and structural benchmarks under the programme for the seventh review, despite significant political and security challenges." The fact is that Pakistan couldn't meet either its tax collection or fiscal deficit targets, though it met IMF's top priority target of increase in forex reserves.
Given the chaotic backdrop wherein this report comes, you are reminded of a verse of Mirza Ghalib which says "Dil ke khush rakhney ko Ghalib yeh khayal achcha hai" (self-deception is a worthwhile indulgence if it makes one feel happy). With the all-round failure of the state, especially in the power sector (admitted by the IMF too), self-deception alone can delight the masses.
Because revenue collection target for 2014-15 wasn't met, during July-September 2016,the government plans to borrow Rs 1.35 trillion, which is 35 percent (or Rs 350 billion) higher than its borrowing during the same period in FY15. The planned borrowing will repay Rs 862.6 billion of its maturing debt, besides providing an additional Rs 287.36 billion.
Despite Pakistan's rising debt burden, the IMF appears satisfied because banks (not SBP) are funding it. That this scenario is squeezing crucially needed credit to the private sector with implications for GDP, exports, and tax revenue growth, as well as chances of reducing the trade deficit, doesn't bother the government or the IMF, although the trade deficit accumulated during 2012-15 amounted to $58.3 billion.
Everyone, from Pakistan to the US, agrees that Pakistan's biggest stumbling block is its inability to generate enough electricity to keep the wheels of its industry moving. Yet, instead of first correcting the flaws causing huge transmission losses, the focus is on medium- and long-term new power projects though, in the interim period, the economy could virtually freeze.
While the cost of Nandipur power project has more than doubled, its completion continues to suffer due to delays, and a new discovery is that work on the Rs 3 billion power plant near Cheechon ki Malian never started, and the project's (fully paid for) Chinese equipment is rotting on the project site. Some expression of concern for preventing an economic collapse! Media reports suggest that nearly a third of the textile industry - the sector contributing over half the export earnings - has already closed and more factories are closing down. On the one hand this trend could cause a huge decline in exports (and expand the trade deficit), and on the other render millions jobless. But the metro-bus projects worth over Rs 110 billion are on.
The latest bombshell for the ordinary facing the likelihood of unemployment is that (as agreed with the IMF) National Electric Power Regulatory Authority has made electricity costlier by 20 to 80 per cent for K-Electric's domestic consumers by slashing the amount of subsidy. It isn't hard to visualise the chaos it will cause in Pakistan biggest city and industrial hub.
In banking, besides assessing the risks a borrower confronts, prudent bankers ensure the deployment of borrowed funds in assets that can generate the requisite repayment capacity. However, it seems that the IMF isn't as serious as it should be in verifying that funds borrowed from the IMF are invested in areas that assure generation of required repayment capacity.
The IMF finds nothing wrong with the grandiose metro-bus and signal-free corridors being built in Rawalpindi and Lahore facilitating only a fraction of the country's population in reaching their workplaces (many of which are headed for closure because they can't survive the rapid rise in their operating costs.) How will this investment generate the capacity to repay the IMF is a mystery.
The government seems determined to set a record in building exchange reserves and in imposing indirect taxes, with zero concern for the consequences this strategy has already had and will have in the days to come, on the economy in the backdrop of massive power loadshedding, although the ongoing slide in exports is no closely held secret.
That competitiveness of Pakistan's industry has weakened drastically in the last five years is a fact repeatedly pointed out, not just by Pakistan's trade associations, but by global research institutions). Yet, the only ones unable to see (or don't care about) this harsh reality are the members of the regime led by our 'businessman' Prime Minister.
The reason why the industry needs subsidies is that, to stay competitive, it was imperative that the industrial base laid during the 1960s was upgraded by early 1990s, but bulk of the industrial sector(nationalised in 1973) became near-bankrupt, and a rapid slide of the Rupee after May 28, 1998 rendered the upgrade and replacement of the industrial base near-impossible.
Yet the focus is on withdrawing subsidies. To make it worse, more and higher indirect taxes are the priority although these levies, that tax the rich and the poor alike, are the shortest route to escalating poverty and social disorder. But why blame the Finance Minister; the IMF too believes that Benazir Income Support Programme - glorified form of dishing out alms - is the remedy.
The IMF supports levy of indirect taxes and withdrawal of subsidies. In the context of the Gas Infrastructure Development Cess, its stance is that court challenges to such surcharges would set back the economic reform programme, particularly the desired increase in the flow of payables, ie, retirement of state liabilities in the energy and power sectors.
Increasing advance income tax on the amounts of banking transactions from 0.3 to 0.6 percent reflects a sheer desperation for collecting revenue because this will expand the undocumented economy - the distortion the FBR has continuously failed to undo although it had the option to do away with such taxes (offering miniscule revenue) to encourage documentation of the economy.
Besides being hugely damaging, how recklessly this strategy is being pursued is proved by the recent FBR notification asking stock exchange brokerage houses to retrospectively pay Federal Excise Duty effective July 1, 2011 although, as per Table-II of First Schedule to the Federal Excise Act-2005 issued in July 2011, FBR had withdrawn this levy "to avoid double taxation".
FY15 was marred by protests against indirect taxes and the economic disparities they created. FY16 may be a more chaotic year because the finance ministry may not fund the commerce ministry's recently announced Rs 20 billion Strategic Trade Policy Framework for the export sector.