The IMF review is to be succeeded by policy level talks, which is a good indication of the review’s success. It was perhaps inevitable that a government without any wish or desire for electoral appeal, should be able to meet the IMF’s criteria, because even if what the IMF wanted was given, it usually meant the kind of measures that would be wildly unpopular. These would be resisted by governments frightened that they would not be re-elected. However, there are certain caveats that should not be attributed to IMF bloodymindedness, but should be given due thought because they contain more than a grain of truth. Perhaps more relevant, they will not go away, because the country will go on having recourse to the IMF.
The first is the caveat about foreign exchange fluctuations posing a threat to the economy. That is well-taken, because the recent decline was because of administrative measures rather than because of any change in economic fundamentals. Though those administrative measures may have worked for some time, they have now apparently stopped working, because the economic pressures on the country were too much. As a matter of fact, from a purely economic point of view, there is little to choose between Senator Ishaq Dar’s tactic of using borrowed dollars to lower the price of the rupee and the use of administrative measures to do the same. One of their commonalities is their temporariness, which is being illustrated in the latter’s case, as the rupee has begun to fall again, despite those administrative measures. The speculators who were dragging down the rupee were actually right in their assessment of where the market was headed.
Another aspect that will not be fulfilled is that of adding about two million new taxpayers, as claimed by the FBR, as it prepares to meet the revenue target. It should be realized that people remain out of the tax net for two major reasons. First, no one provides taxpayers any services in return for tax money. Second, to become a taxpayer means becoming liable to the full crushing weight of the taxation machinery, with the FBR issuing triumphant claims of being able to meet targets by further squeezing those already in the tax net. The IMF has always been worried about Pakistan’s low tax-to-GDP ratio. It will continue to be so, especially if it gives any credence to over-confident predictions by the FBR.
