The International Monetary Fund’s (IMF’s) analysis and prescriptions in the second and final review document under the Stand-By Arrangement (SBA) dated this month are to carry forward to the next programme on which negotiations are currently underway.

This was unambiguously stated in the SBA final review documents: “SBA recognized that resolving Pakistan’s structural challenges will require continued adjustment and creditor support beyond the program period. In this regard the authorities’ interest in a successor arrangement is welcomed to anchor policy adjustments in the coming years, restore Pakistan’s medium term sustainability and pave the way for strong and inclusive growth.

” The disturbing fact is the lack of any attempt by the Fund staff to independently evaluate its SBA programme design, and perhaps even more disturbingly for the current economic team leaders to accept that design as, at best, a fait accompli and, at worst, actually endorse the design. The question is should this be a source of foreboding for the general public and by extension the stakeholders?

The SBA document projections of key macroeconomic indicators for the current year and projection for next fiscal year indicate that the general public cannot look forward to any easing of the ongoing economic impasse: (i) budget deficit for the current year is projected at an unsustainable negative 7.4 percent as well as for next year – with serious inflationary implications that are simply ignored by the Fund staff; (ii) FBR collections are projected to rise by 17.85 percent next year compared to this year and this only after the current year’s agreed target is reached because the agreement is that any shortfall - there was a shortfall of 63 billion rupees in April - will require the activation of agreed contingency measures that include higher duties on cigarettes, fertilizers, sugary drinks etc. – all in the indirect tax mode whose incidence on the poor is greater than on the rich.

Tax to GDP ratio is projected at 10.6 percent this year to rise to only 10.7 percent next fiscal year and one would assume if past precedence is anything to go by that the onus of the rise in revenue would be borne by adjusting the almost 70 to 80 percent reliance on existing indirect taxes; (iii) current expenditure will rise by 15 percent next year, with interest on domestic debt rising by 17.1 percent and on foreign debt by 15.4 percent. One can only hope that the government slashes current expenditure through voluntary sacrifice of all public sector........

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