PM's economic team deserves praise

Prime Minister Imran Khan expressed satisfaction and, one would assume felt considerable relief, at the press release issued by the International Monetary Fund (IMF) stating that "following discussions between IMF staff and the Pakistani authorities in Islamabad from February 3-13, which continued from the IMF headquarters in recent days, IMF staff and the Pakistani authorities have reached a staff-level agreement on policies and reforms needed to complete the second review of the Pakistan government's reform program supported under the EFF." This implies that after approval from the IMF Board, expected early April, Pakistan would receive disbursement of SDR 328 million (around US$450 million).

While no doubt critics of the government would point to the April date for Board consideration as indicative of 'prior' conditions to be met by that date, yet it must be borne in mind that the IMF Board considers several matters pertaining to member countries as well as approval of policy papers and hence a prompt Board date is not always possible. Skepticism to the government's economic team's performance remains especially with respect to agreeing to extremely harsh conditions; for example, the extremely tight monetary policy actions to the point of stifling economic activity and fiscal policy envisaging a highly unrealistic 5.5 trillion rupees tax revenue target which is patently evident eight months into the programme, reserve judgment. These skeptics also maintain that the Prime Minister was misinformed by his team in the past and maybe even at present. Concerns over what was agreed will be revealed as and when the IMF uploads details of the second review negotiations on its website, most probably two to three months from now, that would include the economic team leaders signed Letter of Intent with pledges to meet time-bound structural benchmarks and performance criteria. However, we would like to caution these critics to wait till they have access to the required documents because such negativity would be inappropriate as it may shape market perceptions.

The government's proposals to the IMF during the second review were reportedly to acknowledge that the tax revenue target would not be more than 4.7 trillion rupees, while the IMF was insisting on 4.9 trillion rupees. Dr Hafeez Sheikh, Advisor to the Prime Minister on Finance, had claimed that the tax revenue shortfall would be met by non tax revenue rise and had actually committed during his National Assembly speech that the government would generate an additional 1500 billion rupees more than budgeted from non-tax revenue. This amount offsets the tax revenue shortfall when compared with the unrealistic target of 5.5 trillion rupees leaving a surplus of over 700 billion rupees; however it requires fast tracking the privatization process and ensuring higher than budgeted State Bank of Pakistan profits which had surpassed the budgeted amount for the first quarter by around 200 billion rupees.

Secondly, negotiations had reportedly stalled between the IMF and the government on the recommendation by the regulators to raise tariffs of power and gas sectors - an IMF programme condition/commitment - and the government felt, quite rightly, that with the dramatic erosion of each rupee earned it was not in a position to raise rates further as it may lead to social unrest. The easy and the best way out of this impasse is to improve governance of these poorly performing sectors as they continue to place the burden of their own mismanagement in reducing losses and theft on to the hapless consumers. However, while acknowledging that changing the mindset of existing staff of these entities within a year and a half is not easy yet one would hope that plans to reform the sectors are not only prepared but shared with the public as well.

Business Recorder fully endorses the Prime Minister's satisfaction in his economic team in saving the public from a mini budget - no new taxes and no raising of tariffs - and one would hope that his team continues to exhibit such praiseworthy negotiating skills targeted towards promoting and protecting the interests of general public.