A bit of a tripwire, Pakistan’s current relationship with the IMF. To fulfill the Fund’s conditions, the government has made an interconnected network of calculations, gambits and bets. If even one of these falls through, we’re in a bad way. The target: keeping our fiscal deficit down to 5.3 percent of the GDP or else the international donor agency won’t pay up the next tranche of our loan program. The Fund won’t just hand out a report card at the end of the fiscal and announce its verdict; it doesn’t trust us enough for that. It is, rather, going to monitor us constantly.
The aforementioned mesh of bets rests not only on an ambitious taxation target but also on a healthy amount of foreign inflows. The problem with the latter is that of uncertainty. Especially in these times of financial constraints in the west. The US, for instance, has informed the government that the release of the US $ 300 million that we were due in the Coalition Support Fund won’t be possible before the end of the fiscal year. And it is not just the US that is the problem. The UK’s DFID, which is also a crucial component of this grand plan of ours, might also prove to be testy; it is rumoured their patience is running thin as well. The reasons for all of this are political and can merit a separate discussion.
The need to wean ourselves off dependence on foreign inflows and aid cannot be overstated. There are other, actionable variables that can be handled in a much more proactive manner. For instance, the taxation target seems ambitious only in the existing paradigms; if innovative ideas, the RGST being one of them, were to be implemented, the most conservative of taxation estimates predict a quantum leap.
Similarly, a well-thought out disinvestment in commercial enterprises – bleeding the government dry, a number of them – would also be instrumental in curtailing our deficit to a manageable level.
These are desperate times. They call for more proactivity and less dependence on what the international community will dole out to us. All the progressive developing nations are learning this lesson. When will we?
