Cat not ready to come out of the bag

June 23, 2023 (MLN): In a spectacular turn of events, the International Monetary Fund (IMF) has seemingly given up on Pakistan, as the final push to secure the much-needed tranche of funds under the 9th review of the IMF Program ended on a flat note. 

The meeting between Prime Minister Shehbaz Sharif and Kristalina Georgieva, Managing Director of the IMF in Paris which too scheduled on ‘Pakistan’s request’, concluded without any assurances of assistance, leaving Pakistan's economic future in jeopardy.

The IMF's silence about the tranche added further uncertainty to the situation, as the cat remains elusive in revealing whether economic aid will be provided in the near future.

With the expiry of the Extended Fund Facility (EFF) approaching on June 30, 2023, the IMF has shown little interest in extending further support to the current government. Kristalina's post-meeting statement, which merely highlighted a "fruitful discussion on how the IMF can continue to work closely with Pakistan,” failed to instill confidence. 

This “how the IMF can” clearly reflects that the fund has also given up on Pakistan as the political parties keep on Jeopardizing the already flimsy relationship just to secure its vote bank and political mileage. 

Otherwise, her statement would be, “The IMF will continue to support Pakistan” as always. The absence of a clear commitment to supporting Pakistan indicates a deteriorating relationship between the two parties.

The recent draft budget for FY24 has only exacerbated the IMF's concerns. Esther Perez Ruiz, the IMF's resident representative for Pakistan, expressed dissatisfaction over the missed opportunity to broaden the tax base in a progressive manner. 

She criticized the government's inclusion of numerous tax expenditures, stating that it further eroded the fairness of the tax system and undermined resources for vital social programs and development spending.

Furthermore, the introduction of a new tax amnesty scheme was considered to be in direct violation of the program's conditionality and governance agenda, setting a negative precedent.

In the energy sector, which continues to face liquidity pressures, the IMF suggested incorporating measures within the broader budget strategy. The IMF team offered assistance in refining the budget before its passage.

However, the political landscape within Pakistan complicates matters further. While Prime Minister Shehbaz Sharif insists on unlocking the IMF tranche, Finance Minister Senator Ishaq Dar, citing IMF instructions, refuses to make further harsh choices. Dar's dismissive remarks about the IMF's professionalism and his refusal to heed the fund's advice on tax exemptions have created a bottleneck.

The sitting finance minister's audacious comments, coupled with his physical altercation with a journalist seeking updates on the IMF tranche, paint an ugly picture of the government's handling of the economic crisis.

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