KARACHI: Pakistan has not managed to seal a substantial amount of support from donor agencies or bilateral sources in the two-day Pakistan Development Forum held from November 14 to 15.
The IMF insisted on structural reforms highlighting the reformed General Sales Tax (GST) and electricity as priority areas. Even the long-standing bilateral partners have seconded IMF’s opinion of taxing the rich and the untapped segments of the economy.
The event managed to secure $500 million each from the US and Japan, Saudi Arabia committed $400 million and the World Bank has agreed to provide loans totaling $1 billion on soft terms.
This should definitely help in financing the deficit, flood victims’ rehabilitation and reconstruction activities. However, the bulk of the concessions will only be realised when Pakistan fulfills its commitment to implementing the said reforms.
According to analysts at JS Research, the IMF’s fifth review is still in limbo, as the government had failed to meet the prior flood targets. Among key targets, the government has missed that of the fiscal deficit, borrowing from the central bank and failed to implement electricity and tax reforms, courtesy growing opposition from the coalition partners and in general.
“The IMF is being sticky about its reforms agenda. We believe the government has no choice but to accept its demand or bear the risk of endangering the IMF program altogether,” Muzzamal Aslam of the JS Research said.
The Finance Ministry has already announced imposition of flood taxes to cover the short fall in revenues and introducing the reformed GST from January 2011 onwards, he said, adding that the question now was whether the government would implement the new taxes successfully and be able to continue the IMF programme?
“So far, the PPP is struggling to win support, even from its coalition partners on the reformed GST bill, and clearly, the numbers suggest its defeat in parliament,” Aslam said.
To pass the law, the incumbent party would be required to secure at least 51 percent of votes in favour of the bill, or that the Opposition walkout from parliament instead of voting against the bill.
Given the current composition, PPP only has 125 seats in the National Assembly against the combined votes of the PML-N, PML-Q, MQM, and ANP.
Since, the US is actively engaged in the process of the ongoing reforms and Richard Holbrooke enjoys great relations with all political parties, the Opposition will walk out from the session, instead of voting against the bill.
This way, the PPP government will easily be able to pass the bill through parliament and Pakistan will succeed in securing support from the IMF and other foreign partners.
Government left with no option but to toe IMF line
