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June 11, 2021

Talks with the IMF

 
June 11, 2021

The government appears to be in a fix with its talks with the International Monetary Fund (IMF), with both sides trying to stick to their positions to take the best advantage of the situation. Though some of the indicators of Pakistan’s economy have slightly improved, still there are issues that need resolution before the government can claim to be on track to a sustainable recovery. The government is apparently in a better position to get today's budget passed in parliament, but that will not alleviate the concerns of the IMF which has always been stringent in some of its harsh conditions. As always, the negotiation process with the IMF is a tedious matter and requires fairly strong minds to present their point of view and get acceptance to reach a consensus.

The main issue is the budgetary targets that the government wants to set in accordance with its own priorities of not affecting the country's people much. The IMF is – per its own preferences – more interested in proposing monetary stability even if it costs much to the people. As is widely realised, the conditions imposed by the IMF are seldom of much advantage to ordinary people. These conditions involve raising prices of subsidized services such as electricity, petroleum products, water, and other utilities that are essential. Meanwhile, the frequent changes in the Ministry of Finance do not have a positive impact as with each new alteration the bureaucracy in the ministry faces new challenges. Each new minister or adviser has her or his own style of managing things and that entails a fairly new set of tasks for all.

However, for now the talks must continue as the country still needs the IMF’s support and a likelihood of discontinuing the IMF package will perhaps adversely affect the economy. It is good that the government has decided to keep the revenue surplus on the higher side, but it has to be realistic because in the past we have seen more unrealistic targets become unachievable and then revised repeatedly before the end of each fiscal year. In this regard, non-tax revenue has also been set on the higher side – which needs careful consideration. The petroleum levy is another cause of concern; the IMF wants it to be on the higher side but the government is rightly resisting it. The FBR’s tax collection targets also need to align with the capacity of taxpayers. The discussions with the IMF are likely to continue and one hopes they result in a better solution for the people.