The IMF is back in business in Pakistan. After an eighteen month hiatus involving many heartaches, it has finally agreed to “stand-by” with US$ 596 million in assistance to Pakistan as the country grapples to overcome a multi-faceted illness over the next ten months. This is peanuts, considering that finance minister Shaukat Aziz was originally confident of extracting a medium-term commitment of at least US$2.5 billion towards poverty reduction and growth. Indeed, we wonder whether it is already a case of too little, too late.
Of course, it is nice to know that Mr Aziz sets his feet on firmer ground when he admits that the IMF reprieve is no more than a “breather” which is supposed to pave the way for a new round of short-term debt rescheduling from international donors and enable international finance institutions like the World Bank and Asian Development Bank to pitch in with sorely needed project aid. But it is small comfort to learn that all this is predicated on so many dos and don’ts over the next ten months, with the IMF breathing down our neck like a hawk, that it would be a small miracle if we were able to avoid boomeranging to Square One.
The sting in the IMF’s tail is bound to hurt badly. The standby agreement is proof of that, all 14,000 words or so initialed by Mr Aziz, Mr Ishrat Hussain (State Bank Governor) and Mr Horst Kvhler (IMF-MD). Every day brings a new reading of this daunting document that reveals yet another unprecedented and gut-wrenching experience in store for some section of the population or the other. Here is a short-short list of the more important objectives: implementation of quarterly petroleum price adjustment mechanism for all major petroleum products; ban on new GST exemptions and fixed tax schemes under GST; GST extension to all other agricultural inputs; extension of income tax to all new National Savings Schemes on the same basis as the income tax currently applicable to other financial instruments; extension of GST to all retailers/traders above the Rs 5 million threshold; etc.
All these inflationary measures are bound to provoke an urban and rural backlash. Yet all are to be calmly heaped in the next ten months on the plate of a regime which has not been able to levy a GST on retail trade for over a year, which has not yet privatized a single major project, which has shied away from downsizing a single bloated department, which has increased non-productive expenditures instead of reducing them, one which distinctly shudders at the idea of imposing an extra 5 paisa per kilowatt burden on electricity consumers during Ramadan. Are we then headed for another drubbing from the IMF once the “breather” is called off after we are accused of reneging on our commitments as in the past?
Mr Aziz has no business stumbling from pillar to post in search of economic “breathers” to keep his supergenerals happy. Far from it. He should realise that conditional “breathers” will not right the economic wrongs of half a century. He should also know that radical economic reforms cannot be undertaken or sustained without a longer term amnesty from debt payments that enables a gradual fat-shedding of the economy and its transformation into a lean and mean competitive entity operating in a stable, transparent and democratic political environment. But for Pakistan to join the 50-odd nations queuing up for debt write-offs from the US$50 billion fund established for this purpose by Western countries, certain conditionalities other than those outlined by the IMF in the LoI are required. Why doesn’t he tell the supergenerals what these are and how they might consider going about fulfilling them for the sake of Pakistan? And if they are not prepared to listen to his comprehensive recipes for survival and growth, he should call it a day so that he is able to avoid the dishonourable fate which has befallen his predecessors in the ministry of finance.
To nudge Mr Aziz in the right direction, here is a short list of pre-conditions which the IMF didn’t spell out but which remain implicit in the whole debate about how Pakistan’s supergenerals might escape from the nutcracker of debt and underdevelopment: negotiate a profitable and secure entry into the CTBT, negotiate an honourable and enduring settlement with India over Kashmir; negotiate an orderly retreat to barracks by restoring the relevance of political parties, accepting the necessity of free elections and upholding the supremacy of parliament, and negotiate entry into the comity of educated, modern, liberal, rational nations interlocked in mutually profitable trade and commerce. In other words, what Pakistan needs is not a “breather” from debt-payments but an uninterrupted peace dividend based on a conclusive end to warring at home and abroad. Is this an impossible task?
It isn’t, if the gist of what we are suggesting is understood and sincere efforts are made to cobble a consensus on how to achieve it. But it is, if the supergenerals persist in holding out for “economic breathers” as they go about politically alienating foreign friends and condemning domestic allies. In the final analysis the choice is stark: we can go under as we swim against the tide or we can take off if we become great people to fly with. How about it Mr Aziz? You have nothing to lose except your chains.