Intensity of IMF programme the highest: Pasha

Former finance minister Dr Hafiz Pasha Wednesday said that 'intensity' of adjustments in the current International Monetary Fund (IMF) program is so high that 74 percent of three years' target of current account deficit and 55 percent of fiscal deficit are to be reduced in the first year.

Speaking at the panel discussion on 'Pakistan Economy: Stabilization with a Human Face' at Sustainable Development Policy Institute (SDP), he stated that intensity of the existing IMF program is the highest owing to higher current account deficit and this program has a characteristic of trying to stabilize very much and very fast.

Pasha added that Pakistan is required to contain current account and fiscal deficits and distribution of targets is done in a way that the country is required to achieve 74 percent of the three years' target in the first year. He further stated this time IMF is focusing on primary deficit target to reduce it from 4.5 percent (deficit) of the GDP to a surplus of 02 percent of the GDP in three years. "And in the first the government is expected to reduce the fiscal deficit by 55 percent," he added.

Pasha further stated that during the tenure of previous government, expansionary fiscal policy in election year led to a very high fiscal deficit and even more tragically current account deficit was increased massively in the three years to reach $20 billion in the year 2017-18. This made the repayment capacity very limited after swift depletion of foreign exchange reserves. The size of the problem was so massive that the present government after a delay of nine months had no option but to go to the IMF program.

He pointed out that an elite class has been enjoying the perks and privileges but contributes little to the taxes. He stated that the chunk of resources in perks and privilege class is consumed by the elite of the country. He said instead of focusing on increasing the share of direct taxes, the government is still relying on indirect taxes to achieve the revenue target. He said out of a total of Rs 3,800 billion taxes, Rs 2,074 billion has been consumed by the elite. He said 22 percent of agricultural land belongs to feudal lords whereas they pay only Rs 2 billion income tax.

Pasha suggested that the government should reduce electricity line losses and speed up privatization process to get rid of circular debt and losses incurred by the public sector enterprises.

Poverty level in Pakistan has increased from 36 percent to 40 percent in just one year, he said, adding that the IMF gave all the major projections about the economy, but it is totally silent on poverty and unemployment.

Dr Gonzalo Varela, trade economist of the World Bank, said the share of exports in the GDP is one of the lowest in the region. He said the government should provide a level playing field to exporters so that they might enhance exports.

Earlier, Dr Jochen Hippler, FES Country Director, said economy doesn't have a human face, but at the same time it has two faces which are economy and society and both are interlinked.