While former Finance Minister Abdul Hafeez Sheikh was blindly implementing the tough conditions imposed by the IMF, ignoring their impact on the people,hissuccessor, a more imaginative Shaukat Tarin proposed a plan that could achieve the jointly agreed objective of financial viability without causing widespread suffering or creating unrest. Instead of rising power charges, Tarin suggested stopping capacity payments to electricity-producing companies and reducing line losses as measures to reduce the circular debt.
Before the announcement of the budget, the IMF had asked the government to impose personal income tax of Rs 150 billion on individuals, which would have overburdened the salaried class. Tarin proposes to expand the tax net by drawing into it over 7 million tax evaders. While measures suggested by Tarin need to be widely appreciated, their implementation would pose challenges. Line losses can be reduced only through a costly renovation of the transmission network and ending power theft that takes place with the help of the staff. Similarly inducting the big trading community into the tax net would require political will that was found lacking when an attempt was made in that direction in 2019.
By continuing to remain in the IMF programme Pakistan wants to boost its foreign exchange reserves. It plans to launch $2.5 billion Eurobonds within months to be followed by Sukuk bonds, green bonds and panda bonds. Meanwhile Pakistan has managed to get a $4.5 billion facility for oil and LNG imports from Jeddah-based Islamic Trade Finance Corporation (ITFC). The facility is expected to take some pressure off the import bill and allow the government some room to keep oil prices relatively stable while at the same time increase the petroleum development levy. The Finance Minister has up to September to show his performance when IMF would conduct its review of the programme.
The negative pressures that would have led to widespread protests if the IMF’s hard conditions were implemented have been restrained. A feel-good impact however remains a far cry. The government’s rampant incompetence continues to create difficulties for the people. Gas shortages in Sindh have led to suspension of gas supply to non-export industries, flour mills are on strike over taxes imposed, there is a shortage of AstraZeneca vaccines needed by workers returning to Saudi Arabia and rising prices of essential kitchen items are causing worries all over the country.
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