PAKISTAN and IMF, on Tuesday, finalized staff level agreement at the end of the 7th review under Extended Fund Facility, paving the way for disbursal of next tranche of $506 million by the Fund in June this year after approval of its Board. Finance Minister Ishaq Dar, who made the announcement about successful conclusion of talks at a news conference in Islamabad, took pride in the fact that for the first time in the country’s history the two sides reached the level of 7th review of the economy.
It is a reality that the IMF has bailed out Pakistan on different occasions and its credit has been of great assistance to the country in overcoming its financial woes. The Finance Minister can also take credit for successful continuation of theprogramme which is reflective of the IMF’s confidence in the economic direction of the country. Apart from IMF, the World Bank, the Asian Development Bank and the Islamic Development Bank have also been more than willing to cooperate with Pakistan especially in implementation of some of the crucial energy and infrastructure projects. The country’s foreign exchange reserves are also increasing, albeit on borrowed money and the government is eyeing for all time high reserves in June when IMF releases tranche, and there is also a significant increase in remittances by overseas Pakistanis. The enhanced remittances and substantial decrease in prices of oil in the international market mitigated pressure on the Government but most of the gains have been neutralized by free for all imports. The claims about improvement in economy notwithstanding, the fact remains that implementation of the terms agreed with IMF has so far led to increased burden of taxes on those who are already under strain. The IMF wants Pakistan to do more for widening of the tax base but instead of bringing new taxpayers into net, the understanding leads to increase in the rates of already imposed taxes. The poor is being taxed to benefit the rich. Similarly, electricity tariff in Pakistan is highest in the region and instead of bringing it down, agreement envisages more reforms, which necessarily mean further increase in tariff. A further cut in subsidies is also likely to hit common man as instead of taking away subsidies meant for well off, subsidies on food and electricity become victim of so-called rationalization. Would the Finance Minister, this time, interpret things differently and tax the rich and not the poor both in next budget and unending mini budgets?