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ISLAMABAD: Pakistan Tehreek-e-Insaf (PTI) on Friday said that the International Monetary Board (IMF) staff report acknowledged the PTI leadership’s support paved the way for the IMF SBA and led to the Board’s approval, said a press release.

In a ‘white paper’ issued here, the party said that the IMF staff report acknowledged the gains made under the PTI government, adding following the programme approval in July 2019, the authorities’ decisive policy implementation started to reverse Pakistan’s large imbalances’ left by the PML-N government in 2018.

It was said that the IMF staff notes that under the PML-N government the “misaligned economic policies – including large fiscal deficits, loose monetary policy, and [the] defense of an overvalued exchange rate – eroded macroeconomic stability, increased external and public debt, and depleted international reserves”.

IMF team meets PTI leadership at Zaman Park in Lahore

The whitepaper said that the IMF staff once again highlighted the success of the PTI government in managing the Covid-19 pandemic, adding the IMF report said that “the authorities” policies proved critical in supporting the economy and saving lives and livelihoods’ from the “severe pandemic shock”.

The successes under the PTI government listed by the IMF staff report include: Independence of the SBP; Market-based exchange rate; Ending the flow of circular debt; Expansion of social protection under the PM Ehsaas program and exit from the FATF grey list.

The IMF report is a charge sheet against the disastrous economic policies of the Pakistan Democratic Movement (PDM) regime, which skyrocketed inflation and stalled growth.

It was said that according to the IMF report, the “economy took a tumble in FY23 amid worsening domestic and external conditions, stringent import payment restrictions, and floods”.

The IMF estimates that GDP growth would decline 0.5 per cent in FY2023, against the government projection of 0.3 per cent growth as data in recent months has “disappointed” with LSM activity output contracting by 9.4 per cent “amid frequent announcements of temporary plant shutdowns due to the inability to import machinery and intermediate inputs in a timely manner”.

It said that IMF also pointed out that “consumer and business confidence have weakened sharply” due to “speculation in the media about a possible sovereign debt default”.

Under the PDM government, “inflation has continued to rise due to the regressive import restrictions ’shortages placed upward pressure on prices”, hurting especially the poor’ with “headline inflation reaching 38 per cent in May 2023” compared to 12.7 per cent (March 2022) under the PTI government.

The IMF notes that “despite the mounting pressures, actions by the policy makers lacked clarity” leading to runaway inflation.

It was stated that Finance Minister Ishaq Dar’s obsession with manipulating the exchange rate led to a sharp decline in SBP reserves and “exacerbated the scarcity of dollars, allowed the FX black market to grow and caused disruptions in the timely import of key inputs for domestic production and exports”, resultantly, “sovereign bond spreads tightened to above 3,500 bps, and Fitch and Moody’s revised their sovereign rating to CCC- and Caa3, respectively”.

Similarly, the IMF staff noted that “fiscal shortfall deepened in FY23’ due to ‘deteriorating revenue and unbudgeted expenditure’. Slow progress on structural reforms led to significant ‘underperformance’ in power sector, ‘sending circular debt stock to a new historical high of PRs 2.5 trillion (3 percent of GDP)’. Under the PDM regime ‘CD flow overruns of PRs 387 billion (0.5 percent of GDP)’ were primarily due to ’policy slippages mostly from new unbudgeted, untargeted energy subsidies”.

The PTI leadership sees the IMF SBA as an opportunity to protect the weak and vulnerable citizens that have been burdened by record-high inflation under the PDM regime. The gains from economic stability must be passed on to the citizens and tax policy must seek to address the weak compliance by FBR instead of burdening existing taxpayers.

We note with concern that several of the reforms taken by the PTI government have been reversed and stalled. Key reforms initiated under PTI including retail sector POS, Track and Trace system for big industries, and Single Window customs facility have all been slowed down deliberately, it added.

Copyright Business Recorder, 2023

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