While Finance Minister Shaukat Tarin was naturally self-congratulatory after the passage of the 2021-2022 Federal Budget, which is after all the highlight of the legislative year, but he must be preparing himself for the test ahead, in which Pakistan dickers with the IMF over continuing the Extended Fund Facility it is presently on. The Opposition had vowed to stop the passage of the budget, but it sailed through the House without a division, and was no doubt helped by the absence of Leader of the Opposition Shahbaz Sharif. Mr Tarin has to deal with two major issues with the IMF, which will not be as easy as the Opposition to handle, when its team arrives in Islamabad in August. The first will be resolution of the circular debt issue, and the second would be the power tariff increase.
Mr Tarin and his colleagues have claimed that the Budget makes unprecedented allocations for spending on agriculture and welfare. That might well show the good intentions of the government if the money comes from somewhere to become available. This concern is particularly relevant in the agriculture sector, where the country has become a net food importer after a period of self-sufficiency, largely because the government looked the other way at the wrong time. The IMF will like to ensure that its conditions will be met, and especially at this place in the EFF, it would want Pakistan to take the measures it has promised, increasing the power tariff hike. It is to be hoped that Mr Tarin finds a way out, but the IMF will not now be fobbed off with promises.
The need to remain on the IMF programme requires not just the usual conditions, like improving the tax-to-GDP ratio, or carrying out tax reforms, but finding a solution to the circular debt issue. Whether or not the federal government can hold to its promises under IMF pressure remains to be seen. For the sake of the hardpressed citizen, the government can only be wished well.
