EDITORIAL: The Caretaker cabinet expressed satisfaction at the steps taken during its tenure that was 14 weeks more than the three months mandated in the 1985 amendment to the 1973 constitution. Self-assessment violates the principle of an impartial appraisal and it is this realisation that led all multilaterals to strengthen their evaluation departments by making them independent with their managements compelled to respond to their findings as well as consider their recommendations for future projects/programmes.

First, the previous eleven-party Shehbaz Sharif-led coalition government pledged to implement an IMF staff reviewed and amended budget for the ongoing year with a specific target set for mark-up of domestic and foreign debt, the largest component of the budgeted current expenditure. Data released by the State Bank of Pakistan, the Finance Division and the Pakistan Bureau of Statistics revealed the

following: (i) domestic debt by end June 2023 was 38.8 trillion rupees rising to 42.6 trillion rupees by December 2023, a rise of 10 percent in just six months; consequently; (ii) current expenditure was budgeted to rise by 26.5 percent from the revised estimates of last year (and nearly 53 percent from what was budgeted for 2022-23) yet by January 2024 expenditure rose by 45 percent to 9.26 trillion rupees July-December 2024; (iii) fiscal deficit rose to 2.3 percent of GDP (2.4 trillion rupees) July-December 2024 against 2 percent of GDP (1.68 trillion rupees) in the comparable period of last year, which, in turn; (iv) fuelled inflation to an average of around 27 to 28 percent against the budget projection of 21 percent for the year.

Second, while the caretakers did not have the mandate to announce changes to the tax structure, a source of decades long concern not only to multilaterals/bilaterals as the current structure relies heavily on exemptions to influential groups (rich landlords, traders, middlemen/aarthis, etc.) but also a concern to the general public as reliance on indirect taxes continued (accounting for nearly 70 to 75 percent of total revenue collected) whose incidence on the poor is greater than on the rich. This contributed to the existing 40 percent poverty levels pushing many middle income earners to a lower middle income level, forcing drastic revisions to their kitchen budgets. The Caretaker finance minister’s recommendations for reform were stayed by a court on the grounds that the decision must be left to an elected government; however, the reforms suggested were more administrative rather than in basic structure/model, raising trepidation amongst sector experts about their implementability and effectiveness.

Third, the flow of the power sector circular debt was not contained as pledged to the IMF, and the Caretakers, like their predecessors, relied on raising utility charges to meet the full-cost recovery criteria set by the Fund instead of implementing structural reforms. This led to a reduction in electricity demand, which raised the capacity charges that were contractually agreed by the Pakistan Muslim League-Nawaz (PML-N)-led government in all projects established under the umbrella of the China Pakistan Economic Corridor (CPEC). The caretaker energy ministry proposed a plan to the Fund that envisaged additional financing from the finance ministry for a short period of time, which was rejected by the Fund on the grounds that it was not simply workable.

Finally, the country continues to be in the grip of a vicious cycle – from current account deficit that compels it to go on a Fund programme primarily because we merely export our surplus instead of developing an export focused industry and remain highly dependent on raw material and fuel imports which, as ongoing Ukraine-Russia and Israel-Gaza conflicts reveal, can be highly sensitive to international geopolitics.

Unfortunately, in Pakistan no executive team leader has ever acknowledged his/her mistakes with some ignoring all negative signals/indicators directly attributable to decisions taken during their tenures while others blame their political adversarial predecessors of flawed policy decisions though the previous finance minister Ishaq Dar set a new precedent by criticising Miftah Ismail, a member of his own party. What no political leadership is willing to accept is that no team leader/minister, sector expert or not, has formulated out of the box solutions and instead relied on IMF to set policy and, unerringly, supported administrative measures that pass the buck for sectoral inefficiencies and corruption onto the general public through a rate rise. This view is strengthened by the fact that in its 75-year history the country is currently on its twenty-fourth Fund programme that has a usual duration of three years. This accounts for sustained elite capture in terms of budgeted expenditure and revenue sources though different administrations prefer one group of elite over another and disturbingly accounts for inadequate measures to deal with identified looming crises; for example, the water crisis, the climate crisis.

Copyright Business Recorder, 2024

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KU Mar 05, 2024 11:10am
Successive governments have failed to provide justice or rights to its citizens nor give them an economic future. Primates rule with lies and dishonesty and praise themselves at the peril of society.
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