Yet Pakistan is at a critical juncture, nazook mor, with rising inflation, falling reserves, and depreciating currency. Amidst this, the International Monetary Fund to unlock stalled funding from a $6.5 billion bailout for Pakistan, at a time of “unimaginable” economic crisis.
On Monday night, Asma Shirazi asked questions on this backdrop on her show Faisla Aap Ka. She began by asking what Prime Minister Shehbaz Sharif has said: IMF is giving tough time to Pakistan and combing every book and subsidy.
To answer this, she had a man with expertise in economics Mehtab Haider. PPP’s Maula Bux Chandio and Aun Abbas of PTI were also there to speak about the economy and political scenario.
“Our foreign reserves are around $3 billion. In the next five months, we have a responsibility for external debt servicing and a current account deficit that is around $9 to $10 billion. So we don’t have any choice other than to follow the IMF programme,” Haider started with these facts.
Highlighting the scope of PM Shehbaz’s comment, the economic expert said that the global lender was concerned about the large fiscal gap that aroused after the targets were met and decided under the annual budget. “We signed the agreement that we will make it surplus the target was Rs152 billion. Now the IMF is saying your primary deficit is around Rs1.2 trillion out of which we are seeking Rs400 to 450 billion in expenditures related to floods. Rest there is a gap of Rs800 billion gap. This makes around 1% of GDP.”
Haider, who writes for The News on economics, said that whether the country has to cut its expenditures or generate additional revenues to impose new taxes. “For this, we gave a circular debt management plan for the power sector in which there are around Rs675 billion of additional subsidies. If we increase the Rs7 tariff, the IMF is not accepting this. They say you should decrease subsidies and demand that tariffs must be increased from Rs12 to Rs13. We also have a shortfall in the petroleum development levy (PDL). We will impose PDL on petroleum products or impose GST on petroleum products, which will be around 17%. Third, across the board, the standard rate of GST should be increased from 17% to 18%. Now the government has to make decisions on it.”
He highlighted that talks were “tough” on the pretext of the disagreement between the government and the IMF on the scope of taxes. “Our problem is we don’t have dollars, if the IMF programme is not there then the default is at our door.”
The economic expert went on to add that even if the country defaults then it would again have to approach the IMF. “So I think we don’t have options. We have to take tough decisions. But, right now the PDM problem is that on one hand they have to save their politics and on the other hand I think they have to save the state.”
Asma asked about options available on the expenditures side.
Haider highlighted three areas where the government can cut expenditures while excluding debt servicing.
“Now if we lessen subsidies then tariffs will increase on the people. If there is less development amid the choked economy after floods, inflation will shoot. Defence is very difficult for the government politically. See non-combat expenditures can be cut.”
However, PTI’s Abbas claimed that Pakistan would default even if the country secures IMF funding. “We all knew it this titanic was drowning and Imran Khan many times had said this,” he said and called for long-term policies.
PPP’s Chandio said that no one was satisfied with the prevailing economic situation, but he said: “I know that political stability will bring economic stability. If there is political uncertainty then no one will believe in us. We will not be able to complete any project.”
