Pakistan has suddenly seen a flurry of developments on the all-important economic front. Most significantly, enough to cause further bump upwards on a stock market already buoyed by the State Bank of Pakistan’s rate cut, the International Monetary Fund placed Pakistan’s application for a 36-month Extended Structural Adjustment Facility of $6.6 billion on the agenda of its Board of Directors meeting on September 26. This puts paid to the rumours that Pakistan’s case was going to go forward to some time in October. It also indicates that Pakistan has arranged the rollover of a cumulative $12 billion in loans and deposits from Saudi Arabia, the UAE and China, as well as arranged for loans of 6 billion from commercial banks. At the same time, there is some movement with the government that suggests it is preparing to bring a mini-budget imposing about Rs 18 billion in taxes, to meet the IMF’s revenue target, which the Central Board of Revenue had shown itself unable to meet in the very first two months of the fiscal year. It remains unclear whether the IMF has started imposing conditions even after the staff-level agreement because it senses how desperate Pakistan is to obtain a package, or because it tries to work in new conditions before there is BoD approval of the staff-level agreement.
Though the recent Budget imposed a range of taxes, mostly in the shape of a spread of the GST, it has not really been enough. Some measures are boeing pushed through, such as the re-evaluation upwards of properties in 42 cities, which should yield greater revenue. The new measures seem an exercise at placing a fresh burden on those already in the tax net rather than any attempt to bring more people into that net.The difference this time is that it does not seem the salaried class will be adversely affected. The IMF may well be waiting to see whether the government will summon up the political will to legislate tougher penalties for evasion.
The Shehbaz government did not really serve the treatment it has got from the IMF, because it has been as cooperative as possible. Its own initiatives, especially in the power sector, have found the IMF on the side of the oil lobbies. That just compounds the problem, for there is no IMF suggestion on how Pakistan is to increase its exports. Without such an increase, the target of making the coming IMF package the last will not be fulfilled.
