Who is afraid of IMF?

That one dissident excepted, Economic Advisory Council was unequivocal in telling the PM it was the IMF or the highway. Now we almost have the IMF, after Washington messaged, unequivocally, it is their terms or the highway. All our economic gurus wanted the IMF programme. Now that we have it none are happy with it. 'Be careful what you wish for' would be an unkind reminder. Let's be magnanimous and say they knew the Programme won't be easy but not this hard.
The debate has now shifted from the need for a Programme to how it was negotiated. 'IMF negotiating with the IMF' is a charge that resonates with a host of commentators. That should amuse Asad who many think was sacked for 'negotiating' rather than meekly accepting what was on offer.
There are others who lament the delay. With the confidence of a Nostradamus they prognosticate we should have gone to IMF back in September, quite forgetting we started taking IMF-prescribed medicine much before the Programme was finally agreed.
Then there are the votaries of the 'curse not cure' school. They think IMF's one-size-fit-all formula inflicts a lot of pain without solving the problem. They point to the Fund's paucity of success stories where country after country became a serial offender, revisiting the IMF every few years.
They rest their case on the Pakistan story - our 22nd adventure with the Fund over a span of some sixty years. Conveniently, they overlook the fact that in all but one of these dalliances Pakistan walked out, leaving it to question if things might have been different had we stuck it out.
At the end of our sole fully consummated Programme things did look promising, from reserves to fiscal deficit to inflation to growth. But soon things started to unravel: reserves evaporated, the twin deficits soared, inflation crawled up.
One side of the story is things wouldn't have been so bad had the political situation not taken the turn that it did, leaving the government in a state of disarray. The other side holds that the success of this IMF Programme was illusory; indeed, IMF template is structurally flawed.
In our view the quality of our negotiations - size, sequencing, timing -is the wrong debate. The real debate should be what, and who, makes us abandon IMF midway.
The debate should be about who is afraid of IMF. Put simply, IMF recipe consists of expenditure-income balance. Therefore: increase revenues, fix State Enterprises, control general administration and defence spending, and provide no subsidies except by way of social protection - and no borrowing from the central bank to finance the deficit.
Similar balance, between inflows and outflows, is demanded for the external sector. Therefore: market driven exchange rates and a tighter monetary policy, spiced up with a shot of trade liberalization. Meanwhile, you meet the deficit through borrowing dollars, now better enabled under IMF cover.
Beggars can't be choosers. That said, doesn't what IMF keeps asking us to do make sense? Apparently not - not to those who feel threatened by the IMF measures.
Frankly, the common man, in whose name resistance to IMF programme is mounted, is not really hurt by the IMF per se. He is not a taxpayer, he is not a rent-seeker, doesn't trade dollars, or speculate in real estate and the stock market. He is also a small user of electricity, gas, and petrol.
He is not a taxpayer but ends up paying taxes on almost everything he uses because of all the indirect taxes thrust by a government that cannot collect direct taxes. He suffers inflation not because he adds to aggregate demand but because the affluent do - and because of the machinations of the middlemen.
He is the one who ultimately pays for the inefficiencies of agriculture and manufacturing, principally induced by massive protection and unchecked cartelization, which do not even throw up enough job opportunities. His salvation is the informal sector that absorbs 72% of the non-farm labour force but is increasingly under attack.
He has far less to fear from the IMF than an insensitive and unresponsive government that cannot ensure a decent minimum wage; a government that thinks putting an Ehsaas sheath on the raw end of the stick is mission accomplished.
It is those who have influenced economic policies to their advantage who fear an IMF that demands structural reforms. It is those who managed distortions in tax policies, robbing them of buoyancy and making them shamelessly iniquitous. It is those who are anti-competition, both foreign and domestic, obliging the state and the consumer to subsidize them.
It is big business and its food chain that is afraid of the IMF. Big farmers have resolutely blocked agricultural income tax. They also do not like to pay for irrigation water; even reimburse the maintenance cost of the irrigation system. In many parts they enjoy subsidized electricity for tube wells, unmindful of rising arsenic levels and lowering water tables. They want support prices and subsidized inputs. They blame government policies - not their own neglect - for our atrocious low yields, both per acre and per drop.
Big industry is focused on tariff protection, subsidized energy, and tax breaks. They are quick to point out (rightly) the declining share of manufacturing but are less agile in pointing out the declining productivity levels that has made us so uncompetitive.
They want 'make in Pakistan', as we all do, but the real battle is not in the domestic but global markets. They don't tell us how greater tariff protection, implicit in the slogan, is making us more inefficient and less competitive. They hurt their own case by not coming to the help of a flailing Competition Commission.
Nothing hurts the rich like the weakening rupee. Foreign travel has become that much more expensive, as has their children's education abroad, or their own check-ups in Harley Street. It also throws a dampener on 'Destination weddings'.
Government should not be afraid of the IMF. It should own the reform process. Having already paid the political price the only way to recoup its losses is by steadfastly holding course. It will do the Nation a favour by undertaking tough but delayed reforms, not on IMF say-so, but because this nation deserves better.
Give tomorrow a chance.
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