The bail-out package of the IMF that was approved in Nov 2008 for Pakistan has increased manifold the miseries of the Pakistan in the shape of frequent hike in the prices of POL products, gas/electricity tariffs and unprecedented devaluation of rupee.
Although the Fund claims that it never asked Pakistan to increase prices of POL products, gas/electricity tariff, but the IMF’s pressure on government to increase tax revenues and to eliminate subsidies leaves the decision makers with no other choice, but to resort to price hike.
Interesting to note is that for the past many years the IMF has been putting pressure on Pakistan to increase the tax-to-GDP ratio, but the fund completely overlooks the rulers, policy-makers in government, ministers and legislators who disdain to pay taxes as per their actual income.
Why does not the IMF ask the government to generate tax revenue from the key government policy makers, ministers and legislators who are evading tax and why IMF keeps mum on the government’s move to mop up maximum revenue from masses through increase in tax rates, cut in subsidies and hike in the prices of POL products, gas and electricity tariffs?
These are the important questions that often surface in the minds of the common people in Pakistan who bear the real cost of the bailout package of the IMF.
While forcing government to withdraw subsidies, the IMF completely overlooks the factor that one-third population of this country is already living a condemned life (living below the poverty line).
The people who make policies, take decisions and get money from the IMF, may not understand the definition of living below the poverty line.
“Living below the poverty line means a damned life in this society,” said a poor woman, who works as a housemaid. We don’t get meal according to our wishes, don’t wear our cherished attires, and know not what is happiness in life. In my opinion this is the definition of real poverty in Pakistan, she said.
For how long the people would suffer in the name of the bailout package and for how much the policy-makers would befool the IMF to get money to complete their term of government and to make lavish expenditures.
Another important development is that the fund has withheld the payment of about 3.20 billion dollars worth remaining amount of the bail-out package and forcing Pakistan to take drastic measures to raise tax revenue, reduce fiscal gap that would ultimately further intensify the ongoing wave of price hike in Pakistan.
During recent talks in Dubai, the IMF too had adopted the policy of “Do more” and asked the government officials to take more measures before and after the announcement of 2011-12 budget.
A press statement issued by the IMF after talks with Pakistan’s economic team also reflects the nature of do more philosophy of the fund officials.
According to the IMF, An International Monetary Fund (IMF) staff mission, led by Adnan Mazarei, met with the Pakistani authorities in Dubai over the past week. At the conclusion of its work today, the mission issued the following statement:
“Over the past few days, the Pakistani authorities and an IMF mission held constructive discussions on Pakistan’s stabilization program, focusing on macroeconomic policies for the rest of Fiscal Year 2010/11 and the 2011/12 budget. The authorities expressed their strong resolve to pursue prudent macroeconomic policies and enhance Pakistan’s medium-term growth prospects.
“Pakistan’s economy faces important challenges. Economic growth has been negatively affected by the floods and the high price of oil, inflation remains persistently high, and budgetary problems are undermining macroeconomic stability. Measures to improve confidence in the context of the authorities’ economic stabilization and reform agenda, while protecting the poor, were discussed.
The mission welcomed the recent strengthening of the external position and some of the tax measures announced in March, which represent an important milestone.
Discussions centered on measures to reduce the budget deficit in 2011/12 as well as quasi-fiscal operations (for example, the procurement of agricultural commodities) to reduce inflation, assure fiscal sustainability, and protect the external position.
Reducing the budget deficit will require higher revenue through tax reform to broaden the tax base, including steps to implement reforms in the general sales tax.
Measures to reduce spending on general subsidies in the energy sector have begun to be implemented.
The quality of expenditure could be improved by increasing the share of spending on health, education, and infrastructure. Continued efforts are needed to reduce the budget deficit to take the pressure off monetary policy and create space for more credit to the private sector.
In addition, as government debt has increased, debt management needs to be improved. Moreover, careful monitoring of the financial sector is needed to assure continuing financial stability.
“The IMF remains committed to the ongoing dialogue with Pakistan and discussions will continue in the weeks ahead and a mission is planned for July 2011.”