Pakistan and the International Monetary Fund (IMF) have successfully completed negotiations on the Eighth Review under the 3-year Extended Fund Facility (EFF) programme according to a press conference held today by Federal Finance Minister Ishaq Dar.The minister of finance and IMF’s Mission Chief, Harald Finger, have completed negotiations for the release of the ninth tranche estimated at $500 million under the current EFF programme which amounts to $ 6.2 billion. “Completion of the Eighth Review is indicative of the government’s commitment in implementing structural reforms in areas of taxation, energy, monetary and financial sectors and public sector enterprises,” said Dar. The finance minister also added that the current macroeconomic situation has improved and will improve further with the completion of China-Pakistan Economic Corridor (CPEC). Ishaq Dar also said on the occasion that rate of inflation has fallen considerably during the current fiscal year as compared to the same period last year, and robust growth in workers’ remittances and low oil prices have continued to help contain the current account deficit. Although Dar keeps praising his government’s ‘achievements’ of lowering inflation and the current account deficit, these can largely be accounted for by the increase in remittances from expatriates and the unprecedented drop in international oil prices. Its repeated claims of being committed to boosting economic growth in Pakistan notwithstanding, the incumbent government seems to lack the political will to take the practical measures necessary for that endeavour. So far, this government has not instituted adequate tax reforms to widen the tax net and ensure transparent tax collection. Even the imposition of 0.3 percent withholding tax on traders has led to a strong backlash from the business community, including shutterdown strikes and protests. Dar may seem pleased that Pakistan has received the first nine instalments of the EFF, but this will be another addition to Pakistan’s ever-rising foreign debt. To service the loans that the country already has, the government has to keep borrowing anew, which is not a sustainable economic approach. To get out of this debt trap, the government will have to develop a plan to boost development and trade to strengthen the economy. To achieve true economic stability, Pakistan will have to become self-reliant, which is a long-term prospect in any case. However, the foundation for an economically sound future has to be laid now. The continuing, if not worsening, energy crisis has crippled the industries that supply Pakistan’s exportable goods. The textile industry in particular is on the verge of total collapse, which is alarming because textiles are still Pakistan’s major exports and the backbone of the economy. Its imminent collapse threatens agriculture (cotton growing) upstream and exports, the trade balance and balance of payments downstream. Since it took power in 2013, the PML-N has repeatedly been setting and missing deadlines for itself to end the energy crisis. It appears that the government’s claims that it has worked towards improving the economy are merely postures of political grandstanding to appease the donors like the IMF and other international finance institutions. The finance minister, state financial institutions and Pakistan’s leaders must prioritise the production and supply of electricity and gas, the strengthening of local industry, widening the tax net, and allocating sufficient portions of the budget to promote the public sector. If the current rate of borrowing continues, Pakistan will reach a point at which we will no longer be able to repay our loans. The finance ministry needs to institute a drastic shift to a model of sustainable economic growth and work towards development in general to take the country off the path of threatened economic collapse.
pk.shafaqna.com
