All too familiar
The finance minister perhaps overplayed the IMF’s stamp of approval at the sixth review of the economy in Dubai. True, the Fund was happy enough to okay the $550m tranche, but issues under consideration at the meeting did not exactly reflect a progressing economy. It is not much to celebrate, after all, when one of the major scores of the review was getting the IMF to agree to a downward revision of the tax collection target. It remains to be seen, of course, how the transmission mechanism will play out in other sections of the economy – like funding bottlenecks in the PSDP, and revision of the deficit projection.
Since PML-N made tax revenue one of its principal campaign slogans, it is strange, to say the least, to see its finance managers making the case for missing targets. And who is to say that the revised target is achievable? Already sceptics are voicing concerns that Rs2.691t (down from Rs2.810t) is just as unrealistic. Of course Dar sb dismisses such concerns, but didn’t he do the same when setting the target at the time of the budget? And it’s not like he has a record of getting the finance ministry to consistently meet targets.
Once again, propping up the economy was a combination of robust remittances and chance drop in Brent crude. The role of active policy was minimal, if any. Getting a handle on inflation and easing credit markets was rightly appreciated, but in the latter matter too the Fund did not overlook the ministry’s influence over central bank decision making. Therefore, as the ministry gets much needed elbow room with the tranche, it will have to become more proactive to avoid any future friction with the Fund. The main structures of revenue generation remain faulty, which is why second round initiatives like expanding exports remain out of the question. Unless revenue issues are resolved, the economy will remain dependant on one donor or the other. So far, its condition remains all too familiar.