Pakistan is in the habit of learning a simple lesson the hard way. All kinds of economists were available to prognosticate an economic disaster on the way, but Pakistan dithered. Pakistan’s economy kept treading the unconventional path of spending more and earning less, thereby relying on some supra-natural powers to keep pouring coins in– until today.
Pakistan’s nemesis, the International Monetary Fund (IMF), has spurred into action to deny Pakistan the perpetual divine help. The IMF has brought Pakistan back to the realities of the earth to realize that, without a bailout package, the country cannot run its economy. A full stop for Pakistan’s economic wizards has been delivered. The IMF’s mission is concluding its discussion with Pakistan’s negotiating team, which has tried its best to hide from the general public the full array of discussion. Much has been leaked out through social media.
The IMF has turned down Pakistan’s plan of restricting its budget in its own way. There is no way but the IMF way. The IMF has put forth at least nine demands, as pre-conditions, for Pakistan to accept before it agrees to dole out a $1.3 billion tranche– to help Pakistan service its debt.
First, privatize certain state-run entities incurring incessant losses. This demand is not infeasible. Hyphenated by martial laws, every stint of civilian political government has tried to woo voters by employing more people than required in certain state-run organizations and bodies such as PIA, Pakistan Railways, Karachi Steel Mills, among others. One of the consequences is bankruptcy, while another is underperformance. Pakistan has reached the point where it has to sell its assets to fill the gap between expenditures and earnings.
Second, reduce the defence budget by 10 percent to 20 percent per annum, to at least one third of the current spending. The Pakistanis were told that, after attaining nuclear capability, there would be little need for a large army. Most nuclear capable countries, such as the UK and France, trimmed the size of their armies to make them small but smart armies to spare funds for the utility of the civilian sector.
After June, Pakistan will have to negotiate again with the IMF for the future. One thing is certain, the IMF shackle is perpetual. In short, the IMF is saying that Pakistan should restructure its economy to meet the need of equitable and just distribution of finances across all sectors of society.
However, after 1998, Pakistan forgot this pledge and decided to retain an oversized army, the budget of which is a close competitor to the amount of debt Pakistan has to service. If defence expenditure is vital for Pakistan’s physical security, debt servicing is vital for Pakistan’s economic survival. Now, both factors– defence expenditure and debt servicing– are competing with each other for their survival.
Nevertheless, it is still a mystery how could the family of Pakistan’s former Chief of Army Staff (COAS), Gen Qamar Javed Bajwa, makde a fortune of Rs 12.7 billion in six years (from 2016 to 2022), as per the leaked tax record vented by Fact Focus by an investigative journalist, Ahmad Noorani. This kind of news does not shy away from transcending geographical boundaries and landing on the table of donor agencies, including the IMF. Pakistan is now paying the price of all such mysteries which helped army generals–who belong to the salaried class– amass wealth in millions and billions.
Third, declare assets of government officers, both civil and military. Civil officers, especially those who work closely with political governments are prone to indulging in dishonesty, but the military officers who happen to work along frontiers, which are prone to smuggling, are not clean either. Smuggled goods from Afghanistan and Iran cannot reach urban cities such as Lahore and Islamabad without the collusion of the security forces deployed along the borders. The scourge of corruption has marred the face of civil and military alike. No exception. Both are culpable.
Nevertheless, the IMF’s condition has implied the assets of the judges must be revealed. Certainly, if the judiciary enjoys the facility of independence in the federal structure, the facility does not empower the judiciary to stay immune from financial accountability. Interestingly, this demand of the IMF militates against the status of sacred cows granted to both the military and the judiciary. Regrettably, the IMF is dismissive of any power that could enjoy monopoly on national affairs.
Fourth, counter the circular debt of Rs 900 billion. This is a staggering amount. Unfortunately, Pakistan is bereft of financial sources to pay even the circular debt– not to say the foreign debt. Pakistan’s current COAS, Gen Asim Munir, is moving from pillar to post to secure some financial relief for Pakistan. He may not succeed because, as expressed through former US President Donald Trump on 1 January 2018, the USa was annoyed with Pakistan for its non-compliance in the war on terror. The current US administration would also not help Pakistan out.
Fifth, increase tariff (levy) on gas and electricity utilized for energy purposes. The Pakistanis tend to conspicuous consumption. They have not developed the habit of living and spending economically: frugally and thriftily. Instead, wastefulness is part of national life. Now, they have to learn to be frugal and thrifty to the extent of being parsimonious.
Sixth, increase THE General Sales Tax to 17 PERCENT on all petroleum products such as petrol, diesel and kerosene oil. Petroleum products permit the running of day-to-day business. Money changes handS and so the economy moves on. With the rise in the price of petroleum products, the price of all commodities is bound to soar. Hyperinflation may induce hypo-consumption.
Seventh, introduce amendments in audit and accountability laws including the Acts governing the Federal Investigating Agency and National Accountability Bureau. Both have to work in coordination to discourage corruption.
Eighth, introduce anti-money laundering laws in line with the conditions imposed by the Financial Action Task Force. This is despite the fact that, from 2018 to 2022, Pakistan undertook numerous steps to satisfy the FATF.
Ninth, impose taxes worth Rs 300 billion immediately through a mini-budget.
After June, Pakistan will have to negotiate again with the IMF for the future. One thing is certain, the IMF shackle is perpetual. In short, the IMF is saying that Pakistan should restructure its economy to meet the need of equitable and just distribution of finances across all sectors of society.
