The ninth mission of the International Monetary Fund (IMF) visited Pakistan from January 31 to February 9 and emphasized various measures including removing unnecessary subsidies, adopting stable sources of income, and implementing more economic policies of the government. The effects are now beginning to show.
In the supplementary finance bill presented by the federal government of Pakistan on Wednesday, new taxes of 170 billion rupees have been imposed. Everything in Pakistan, especially petrol, electricity, gas, etc. should be expensive for the people?
The BBC has spoken to experts to find out. Are the policies of the IMF really strict and does it determine the prices in the country?
Why does the international organization want to increase electricity prices? Economist Dr. Khaqan Najib says that the prices of petrol, electricity and gas in the country are determined not by the IMF but by regulators like Nepra and Ogra. It is possible, for this, the government gives subsidies, and the government has to bear the loss in this regard.
He said that, for example, the price of gas that Ogra had set in September 2020, we have not been able to give it to the consumers until now, which has caused a loss of 1600 billion rupees. The fixed price is passed directly to the consumers, so the government has to increase the deficit and increase the prices of electricity, gas and petrol.
Sana Tawfiq, lead economist and economist of Arif Habib Limited, said that the IMF does not want the prices of goods to increase in Pakistan. It demands the government to bring its economy in the right direction. The steps that have to be taken to bring the economy of any country in the right direction lead to inflation, leading to the subsidies given on the prices of gas, electricity and petrol increasing the prices, thereby reducing the financial deficit of the government. But the burden falls on the ordinary consumer and his purchasing power decreases.
Tawfiq said that the IMF has asked Pakistan to keep its currency on free float and artificially stop it because it has depreciated the rupee and, in the case of imports, you import expensive goods. You do and it also affects the consumers. Journalist and economist Shahbaz Rana says that the IMF demands from Pakistan that the real price of anything i.e., gas, electricity and petrol should be taken from the consumers. All over the world, this is how it happens. However, he said that the IMF can be blamed.
That is, the kind of taxes that have been imposed in the supplementary finance bill, the IMF should not have accepted. He said that the GST rate has been increased but no new tax has been imposed on traders. It is criminal negligence of the IMF because, on the one hand, it is putting pressure on the government to take permanent measures. But the increase in GST will increase inflation.
Here the question also arises in the mind that if the IMF has so much influence on the economic affairs of Pakistan, then why is it delaying giving credit to Pakistan? According to Dr. Khaqan Najeeb, there is a lack of trust between Pakistan and the IMF at the moment and therefore the seventh review meeting of the current IMF program has been delayed and now the ninth mission review meeting has been postponed to February instead of November. Went
It should be noted that yesterday the Federal Minister of Finance Ishaq Dar also criticized the former government and said that the Imran Khan government deviated from the agreement made by itself and refused to accept it by taking decisions contrary to the important points of the agreement, as a result of which, the IMF agreement has been delayed and the trust gap between the IMF and Pakistan has increased.
Dr. Khaqan Najib said that the confidence of the IMF will be restored with the recent steps of the government and there is a strong possibility that the talks between the government and the IMF at the staff level will be successful in the next one to two weeks.
According to Sana Tawfiq, the IMF is discouraging Pakistan from releasing the loan tranche, which, after the seventh and eighth review meetings in September last year, the IMF asked Pakistan to take some measures regarding the economy, including gas. It also included removing some other subsidies, including electricity and petrol. But due to the delay of the government, the reserves of the national treasury fell below 3 billion.
Sana Tawfiq said that the government did not take such steps due to political reasons which had to have a direct impact on the people. Reduce your deficit, then we can continue to negotiate with you and hopefully these measures, which are certainly very tough, will restore the confidence of the IMF and the tranche will be released to Pakistan in March.
According to economist Qaiser Bengali, there are two main reasons why the IMF is reluctant to lend to Pakistan. The IMF is a bank, and any bank wants to make sure that it can get money before giving a loan. Another current account deficit, we need to work on reducing both these deficits. Due to which, the IMF is hesitating to give loans to Pakistan. Dr. Qaiser Bengali says that the IMF has a policy structure and under this, it reviews each country and issues loans.
Has the IMF proposed any measures to protect the public from inflation? Dr. Khaqan Najib says that any financial institution must say that subsidies should give targeted subsidies to the poor class of society. That's why the fund for the Benazir Income Support Program has been increased from 360 billion to 400 billion rupees.
He says that giving targeted subsidies is one thing, but in the agriculture sector, giving a 118 billion rupees electricity subsidy to tube wells increases the deficit and it should be eliminated under the IMF program. According to Dr. Khaqan Najib, the government itself could take some steps, such as increasing the minimum wage in the country from 25,000 to 30,000. Targeted subsidies on petrol can be given to low-income earners.
In response to this question, Sana Tawfiq said that the IMF. The poor and low-income sections of the country are concerned and demand from the government to reduce the expenditure on their social security measures and spend on their social security. Sana Tawfiq said that in addition to the money spent by the government on the rehabilitation of the flood victims, it can also be expected that the IMF can give concessions to Pakistan in this regard.
While Dr. Qaiser Bengali says that it is not the responsibility of the IMF to take care of the welfare of the people of a country, but it is the responsibility of the government. It calls for reducing or eliminating subsidies. But why does it not pay attention to two important economic problems of the country? The budget deficit and the trade deficit are more expenses than the government's income. So, why does the IMF not pay attention to reducing government.
expenses, why does it not pay attention to reducing the defense budget? He said that these questions raise concerns about the political objectives of the IMF, that the IMF is pressing the people of the country under the burden of taxes, but he does not want to cause any harm to the country's establishment.
Qaiser Bengali said that the World Bank and the IMF talk about privatization, but why don't they talk about the privatization of the business enterprises of the Pakistani army? No relief can be found.
