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EDITORIAL: The political decision, notably to dissolve the assemblies of Punjab and Khyber Pakhtunkhwa by Pakistan Tehreek-e-Insaf leading to the establishment of caretaker government, has, without doubt, strengthened the federal government’s capacity to ensure the success of the ongoing ninth review discussions with the International Monetary Fund’s (IMF’s) visiting team — a success that as agreed with the IMF in the seventh/eighth review documents and budgeted in the current year required a combined provincial surplus of 750 billion rupees.

The review documents further noted that “the provinces have committed, through MoUs they have signed with the federal government in late July 2022, to deliver their individual commitment to an aggregate provincial surplus of 750 billion rupees.

While this is a considerable increase from fiscal year 2022, the federal government is confident that the provincial authorities will exercise spending restraints, as needed, and deliver on their commitments.”

Pakistan authorities confirmed that the MoUs were signed with all four provincial governments in July 2022 on their respective provincial 2023 fiscal target consistent with the FY2023 general government fiscal targets under the programme.

Reports also suggest that prior to their dissolution of the Punjab and Khyber Pakhtunkhwa assemblies the governments in these two provinces expected elections to be scheduled within three months as stipulated in the constitution — an assumption that led to unbudgeted disbursements designed to win elections rather than with a view to ensuring the country’s economic sustainability.

This is not to aver that the federal government either adhered to the spirit or the specific time bound conditions/structural adjustments it pledged in the seventh/eighth review documents that include a controlled interbank rate and a widening differential with the open market rate at which dollar was available, which led to a decline in remittance inflows of 2 billion dollars compared to the year before in the first seven months, a 110 billion rupee unbudgeted electricity subsidy to exporters which raised the budget deficit and failure to increase electricity and gas rates to meet the objective of full cost recovery as well as meet the targeted petroleum levy of 850 billion rupees.

It is indeed regrettable that there have been gross violations of the agreement reached with the Fund in the seventh/eighth review by the federal government as well as the provinces and, at the same time, there are serious concerns amongst the productive sectors as well as economists based on his past track record that the Dar-led economic team may not have the capacity or the intent to engage in long-term reforms that are being insisted upon by the Fund and that this economy desperately needs.

There is a consensus that the ninth review will be a success as at this point the government has no other option but doubts about the next review remain. It is hoped that these doubts are dealt with and the focus shifted towards reforms that can take the economy out of its cyclical impasse.

Copyright Business Recorder, 2023

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