Let's hope this confidence is not misplaced

According to informed sources, the visiting International Monetary Fund (IMF) team has been informed that the government did take appropriate measures to avert a near-collapse.
The proof of this contention was no doubt provided by the release of the Federal Board of Revenue (FBR) statistics that show that income tax collections during the ongoing year rose by 6.1 percent during the first eight months, while indirect tax collections rose by 12.9 percent - or in other words, there was some improvement in tax collections over the corresponding period last year.
Be that as it may, critics would no doubt argue that increase in tax collections are from existing tax assessees, who are under-payers or non-payers - a focus that has come under considerable criticism, from not only international donors but also from the public at large urging the government to reform the tax system by ending income tax exemptions on the rich and influential, notably the rich farmers, reducing massive annual leakages from the exchequer and to end all existing anomalies in the system.
It is only through reform that the tax to the Gross Domestic Product ratio would rise, so correctly argue analysts. The government has also been at pains to bring it to the notice of the IMF and Marc Grossman (the newly appointed special representative of the US on Afghanistan and Pakistan, currently also on a visit to this country) that expenditure has been curtailed through not only paring development expenditure by 30 percent from budgetary estimates, but also through slashing the number of federal ministers.
However, the Federal Finance Minister indicated that current expenditure could not be slashed by a greater amount, despite the resource constraints, due to the ongoing war on terror.
The IMF is unlikely to challenge Pakistan's annual allocations on defence as it has in other countries, because of the importance placed on Pakistan's continued engagement in the war on terror by the international community; yet, so argue detractors, the Coalition Support Fund (CSF), released by the US government is earmarked to cover the costs of our war on terror.
The bone of contention between the US and Pakistan these days is that releases under the CSF are subject to delays, with the US no longer releasing funds based on invoices. This is largely attributable to recent statements by Pakistan's former President Musharraf who claimed that the CSF earmarked for fighting the war with the Taliban was diverted to dealing with the military's continued threat perception from India.
In addition, recent financial scams that have rocked Pakistan have compelled donors to insist on greater transparency and accountability in Pakistan before they disburse their pledged assistance. The IMF, such is the consensus amongst bilateral and multilateral donors, is the only entity that can ensure compliance with the agreed reforms.
The fact that the Stand-By Arrangement (SBA) of the Fund remains stalled is therefore a source of serious concern to the Finance Ministry as it has witnessed a cessation of disbursements from other bilateral and multilateral agencies for budgetary support.
Analysts however hold the government and its finance team responsible for two other negative trends currently visible, apart from failing to reform the tax system. First its endorsement of the policy to print money to meet its expenditure, a highly inflationary policy, in spite of its commitment to the IMF under the SBA that it would refrain from such a policy.
Second and equally importantly, it has been unable to convince other political parties in the parliament, members of the opposition as well as coalition partners, of the efficacy of its reform measures with respect to the implementation of the reformed general sales tax and the one-off increase in some taxes to pay for the cost of the recent floods.
Convincing non-PPP parliamentarians would remain a challenge for the government, until and unless it can convince them, as well as the taxpayers, that the tax money collected is spent wisely, with a greater outlay on employment-generating development expenditure, rather than on non-development expenditure and that it would desist from taking populist decisions with respect to overstaffing state-owned entities with political loyalists, a fact that accounts for rising bailout packages for these units, and appointments to head these units, based not on merit, but on nepotism or loyalties.