PTI government & IMF’s doctrine

An International Monetary Fund (IMF) mission led by Ernesto Ramirez Rigo held virtual discussions during the last six weeks regarding the sixth review of the IMF’s Extended Fund Facility (EFF) during the year 2021. According to an IMF report, the Ministry of Finance and IMF staff have reached a staff-level agreement on policies and reforms needed to complete the sixth review under the EFF. The agreement is subject to approval by the Executive Board, following the implementation of prior actions, notably on fiscal and institutional reforms. The completion of the review would make available US $1,059 million, bringing total disbursements to about US $ 3,027 million under the ongoing IMF’s Extended Fund Facility.
The report suggests that IMF authorities appreciated Pakistan’s progress on anti-money laundering efforts under AML/CFT framework, although some additional time is needed to strengthen its effectiveness, achievement of FBR’s tax target, State Bank of Pakistan accommodative monetary policy and tax legislation. The IMF called on Pakistan for several measures including improvement in governance, transparency and efficiency of the state-owned enterprises (SOEs), availability of a business-friendly environment and control of corruption. According to the report, the IMF also demanded to step up climate change measures including the finalization of the National Adaptation Plan (NAP) and NDC targets.
Pakistan and Washington based International Monetary Fund (IMF) concluded an agreement on a $ 6 billion bailout package called extended fund facility (EFF) in 2019. The IMF staff in the country had been monitoring the implementation of the program and the IMF put the program on hold in January 2020, after the government refusal to increase the prices of electricity and imposition of taxes under various heads.
The two sides were in negotiation over the last few months and IMF was demanding imposition of taxes worth Rs. 150 billion besides massive increase in the electricity and gas prices, however government was reluctant to huge crease in the prices of utilities because inflation was already high and record devaluation of the rupee made the situation worst for the government. However, the IMF did not move from its position over the last two months. Finally, the PTI government kneeled down to IMF’s demands after a motivational sermon of the Prime Minister two weeks ago. After getting demands done, IMF staff forwarded the draft for approval of the executive board. In fact, IMF’s demands were based on the agreement that both parties signed in 2019. The IMF agenda points were reduction in Public debt through taxation, cost recovery of energy sector and state-owned enterprises, administrative reforms to strengthen revenue mobilization and improvement in public finances, however the government of Pakistan followed the IMF’s agenda partially, which led to the halt of the program. The impact of unprecedented inflation caused by the mismanagement of the government was many times worse than the effects of the IMF proposed measures if those were implemented in true spirit. PTI came into power on an ambitious anti-corruption agenda, however it could not realize its tall claims instead corruption has grown many folds during PTI’s era. Though the government has secured the deal after tough negotiation and satisfaction of detested demands of the IMF, but,it must go through the process of self-answerability to avoid repetition of the blunders.