EDITORIAL: Human Rights Watch’s (HRW’s) World Report 2024 only confirms what most Pakistanis have been complaining about for more than a year, that IMF’s (International Monetary Fund’s) insistence on austerity and removal of subsidies without any compensation caused undue hardship to lower-income groups.

Because it’s not just that the Fund enforced extremely contractionary monetary and fiscal regimes, it’s also that it demanded higher revenue as a core condition for keeping the bailout programme rolling.

And that, in the absence of structural reforms that it has long (unsuccessfully) pushed, meant a torrent of indirect taxes that always hurt the poor more than the rich; that, too, in times of record inflation and unemployment.

While the report covers more than a hundred countries and includes issues like climate change, human rights, education, harassment, etc., the bit about Pakistan’s “worst economic crisis” in 2023 should worry people here.

A few things are particularly alarming. One, everybody knows that an active IMF programme is the only thing between the sovereign and default; because it’s the only way to keep creditors rolling over our repayment schedule. Two, these programmes now come with very harsh “upfront conditions” and will, and have been, cut off the minute any of them is violated. Three, as the report rightly notes, these conditions demand increasing revenue figures when fiscal policy must be kept tight and the monetary policy extremely hawkish.

Four, this is a cycle that the country will not be able to escape until it also initiates even more painful reforms; which will take a long time to complete. And five, this leaves little to hope for from the democratic government that will take shape after the Feb 8 election. So, if 2023 brought the “worst economic crisis” Pakistanis have ever had to navigate, there’s little if anything to suggest 2024 will be any better.

Let’s not forget that his country has one of the world’s lowest tax-to-GDP ratios and also one of its largest populations. Almost half of them hover around the poverty line and 22 percent grind below it. A national policy that centres on piling indirect taxes on them is not just cruel, but also unsustainable. And going by the rioting that followed inflated electricity bills in Aug-Sep last year, too much longer of this policy will tear not just the economy’s, but the entire society’s soft underbelly.

There is, therefore, an urgent need to initiate reforms. It is going to be a long and painful process, but we’ve come to the point when it is the only alternative to a complete, quick capitulation.

The first reform should be an admission that the poor have been made to pay for the elite siphoning their taxes for far too long, and the latter should be forced to take the lead in finally expanding the tax basket.

That will give the desperate elbow room needed to negotiate lighter conditions with the Fund. And then, finally, structural reforms can be implemented without pushing a big bulk of the population over the edge.

Copyright Business Recorder, 2024