Several prominent federal ministers publicly stated that the taxation measures approved by parliament on 28 June were prior conditions of the International Monetary Fund’s (IMF’s) “successor” loan to the nine-month-long Stand-By Arrangement (SBA) whose last tranche was released in May.

Two prevailing factors strengthen this perception. One, Finance Minister Aurangzeb has consistently stated that the successor IMF loan is Plan A, there is no Plan B, and he expects programme approval this month, which implies negotiations are at an advanced stage. And, two, given that the tax measures submitted to parliament by the finance minister on 10 June were less politically challenging than the amendments approved by parliament two and a half weeks later (which do not reflect the recommendations of the Senate Standing Committee on Finance and Revenue as those discussions centred on reducing and not raising the burden on the public) the blame can more easily be placed on the IMF’s prior conditions.

The question is whether the administration is using the Fund as a convenient scapegoat, given that the Fund staff typically refrain from challenging the government’s stance publicly, or is it in fact the case? Two elements have been prevalent in our interactions with the Fund staff since staff level agreement was reached on 12 May 2019 on the Extended Fund Facility. Firstly, the Fund displayed considerable rigidity in either revisiting or phasing out harsh up-front conditions (inclusive of periodically raising electricity and gas tariff to achieve full cost recovery in spite of a large per unit tax component, petroleum levy considered the lowest of all hanging fruit, a market based exchange rate and a primary surplus that led to massive increase in borrowing) due to the country’s long history of abandoning a Fund programme when the balance of payments position strengthened in the aftermath of a Fund loan.

And secondly, its corollary is equally applicable: the economic team leaders appointed since late 1990s (including caretakers) either had similar qualifications and........

© Business Recorder