The IMF-Pakistan story
The finance minister’s ritual celebration of his handling of the economy – particularly ensuring funds from the Fund – risks running into the proverbial brick wall as the government’s resort to unprecedented taxation sinks in. And once again ordinary people will be milked – in addition to stagnant earnings and an alarming sales tax already in place – because of the government’s inability to do its basic job of raising revenue from traditional sources. Every time Dar sb took his extended entourage to Dubai for IMF talks during this outgoing program, he had to make excuses for missing crucial targets – revenue predominantly.
There was no other outcome, realistically, of always being behind the curve on revenue and deficit. Now the government is forced to employ unconventional methods. And while Dar sb is doing his usual thing by selling the last-minute deal as another leap forward for the economy, the people will be directly affected by this latest caving-in. And as warned repeatedly in this space, the ruling party will find itself in troubled waters because of the economy as the next general election draws near. The economy is already weak. Earnings are low and GDP is soft while revenue is chronically low, as always, and the deficit is beyond target.
Inflation is under control, granted, but prices have been affected more by the international Brent collapse than any government policy initiative. Now, with taxes suddenly mounting, people will not like having to pay – literally – for the government’s incompetence. Raising the tax base was one of the N-league’s core campaign promises. Now, half way through its third term, the ruling party has not only failed to increase basic earnings, it has to squeeze the people so it can continue borrowing from the IMF to maintain operational liquidity. There could not be a more text-book example of a debt trap causing deep-rooted structural disintegration in the greater economy. In this age of awareness, such performance is likely to cost any incumbent heavily at the polls.
