The deal struck with the IMF is going to have a lasting impact on the economy and people of Pakistan. Though the IMF’s executive board is yet to consider approval of the next tranche of over one billion dollars, the staff-level agreement has paved the way for it. The virtual discussions to reach a consensus lasted for six weeks so that the sixth review of the authorities’ reform programme can conclude as supported by the IMF’s extended fund facility. The most significant impact of this development is that Pakistan will have to make fiscal adjustments of over Rs800 billion – and that the government can do only by raising revenues and slashing down expenditure. The government will also need to seek approval of parliament for a mini-budget to remove GST exemptions that are likely to fetch around Rs350 billion.
The deal also stipulates that, while giving near complete autonomy to the State Bank of Pakistan (SBP), the government will also abolish the Fiscal and Monetary Coordination Board in order to have a more ‘rationalised’ SBP structure. Now in addition to the SBP Amendment Bill 2021 the government will also enact Supplementary Tax Laws to abolish GST exemptions. This is nothing short of dictating a sovereign country’s parliament to pass laws even if they are not in a larger and more sustainable interest of the people of Pakistan. Perhaps due to the precarious constitutional and legal frameworks in Pakistan and unstable political governments the IMF wants parliamentary approval so that any future governments find it difficult to rescind these laws. In this manner, the IMF has secured its own diktats at least for the near future.
The government will have to do some more legislative sleight of hand to accomplish these ‘prior actions’ before January 12, 2022 – just six weeks away. Going through all this rigmarole just to obtain one billion dollars shows the state of Pakistan’s precarious economy. A government which leads a country with a population of over 250 million has been easily arm-twisted for a meagre billion dollars. What happened to all that talk of economic acumen and financial expertise before the 2018 elections? The government will jack up the petroleum levy by four rupees per litre every month to increase it up to Rs30 per litre. So the citizens of Pakistan will be coughing up amounts of Rs356 billion against initial collection estimates of Rs610 billion during the current fiscal year. While the government may find some relief in this, the people of the country stand rather doomed to a pretty tough economic future.