Pakistan and IMF: a road to nowhere


Pakistan Institute of Development Economics (PIDE) organized an INVITED lecture on ‘Pakistan and the IMF’by Dr. Meekal Ahmed, Visiting Senior Fellow, PIDE and formerly Senior Advisor to Executive Director IMF and Joint Chief Economist, Pakistan Planning Commission, here on Wednesday. Mr. Shahid Kardar, former Governor State Bank of Pakistan presided over the invited lecture. In his lecture Dr. Meekal analyzed the IMF’s interaction with Pakistan. He said a great deal is written and said about the IMF’s interaction with Pakistan, none of it good, most of it couched in sweeping negative terms and some of it quite hostile.
He held that at the same time in Pakistan who have a deep abiding commitment to economic reform and feel frustrated by the fact that so little reforms has been undertaken think that the IMF have been insufficiently tough on Pakistan, letting Pakistan off the hook time and again rather then taking the opportunity of a critical situation to push through much-needed reforms. Dr. Meekal added that to some this suggests that the IMF is in cahoots with Pakistan’s elite and is not willing to stare down powerful vested interests in agriculture, the stock market, the real estate sector and services which remain untaxed. “Yet, despite all the programs we have had with the IMF and the legions of technical assistance missions and fiscal experts, the tax system remains dysfunctional, discriminatory, and corrupt with too many exemptions, concessions, tax arrears, non-filers and under-filers. Pakistan’s tax to GDP ratio after 64 years is still amongst the lowest in the world and risks falling further,” he said.
He discussed that the fund is accused of being anti-poor forcing countries to cut spending in the social sectors such as health, education and so on, is untrue. The prerogative of where to cut spending, generally a better route to fiscal adjustment than raising taxes, belongs to the country authorities, not the fund. “The fund is neither clairvoyant nor omnipotent and has made mistakes most spectacularly in Asia. For our part, we need to reflect on way we are a ‘prolonged user’ of fund resources and unable to get out of their clutches and stay out like other successful developing countries have done,” he said. Former Governor State Bank, Shahid Kardar said that in Pakistan we have no proper implementation mechanism to seriously undertake any policy reforms. He said, “We have high default rate in electricity bill payment, as private sector is defaulter of Rs 160 billion the question rises why we not disconnecting them?. On the other hand we have 34, 000 registered electricity commercial users of which only 4000 file tax returns. He emphasized on governance issues and lack luster priorities of policy makers. He categorically pointed out that bureaucracy is just not willing or committed for economic reforms. He pointed out that for political reasons the agriculture sector is not taxed but are getting huge subsidies on fertilizers. While speaking on the occasion, Vice Chancellor, PIDE, Dr. Rashid Amjad said that in last 20 years Pakistan had been through 15 IMF programmes with very little to show for them. In the current uncertainty the investment rate has dropped to 11 percent of GDP the lowest in the country’s history.