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Saturday January 22, 2022

Destination IMF

January 14, 2022

To go or not to go to the International Monetary Fund (IMF) has been a question dogging the PTI government since 2018. On Jan 11, 2022, Prime Minister Imran Khan expressed fears that the government would have to go to the IMF again if Pakistan’s exports did not increase sharply. After remaining in power for three and a half years, if the government is still undecided about how or when to approach the IMF, it is once again displaying a complete lack of understanding of the challenges Pakistan has been facing. Somehow the government has been unable to realise that from the word go, exports needed a boost. This called for a comprehensive strategy to enhance the export potential of the country, but the economic managers kept dilly-dallying. Then the question of tax collection remained unresolved as there were multiple and competing narratives being peddled by the fiscal authorities in the country. The government should have identified some main driving agents to boost the country’s economy. Instead, the government kept focusing on other issues that did not contribute to export promotion at all.

On top of it all, the price hike that people have suffered for over three years now has not abated a bit, with most food items pricier and even bare essentials becoming hard to buy. It is a no-brainer that a country cannot boost its exports if there are hurdles on nearly every step. If exporters face bottlenecks at every turn of the export procedures, business owners get tired and investors shy away from any new investments. To give a spur to the economy, exports need a smooth flow. Some of the conditions that the IMF imposes on its target countries hamper wealth creation, rather than improve it. The export sector has been stagnant for a long time now, and the government’s facilitation is not up to the mark. It appears to be more interested in complying with the IMF conditions by introducing the mini-budget that is likely to do more harm than good to the citizens of Pakistan.

Though registration of the retail market in the country may be a good step forward, it has its own peculiar conditions other than the countries where retail markets are fully registered. The same applies to tax automation that the IMF recommends as a one-size-fits-all remedy to its target countries. More than automation, the country needs an active and equitable tax culture. Higher tax ratio should also reflect in better public services, without which taxpayers do not have much incentive to pay their taxes. The current government has increased its tax collection but there has not been any corresponding improvement in public service. The IMF also wants all countries to go on a privatisation spree in even public amenities such as education and health. The health-card initiative is a case in point which will involve insurance companies and the private sector whose reputation is not above board. In short, the government must approach carefully the path that the IMF recommends.

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