Playing IMF hardball

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The ruling PTI is stuck between the devil and the deep blue sea. Just a few months into its tenure and the dream of Naya Pakistan threatens to come undone. And the economy is to blame, stupid.
Even before Imran Khan and his team swept to power back in the summer, it was evident that the country would have to approach the IMF; begging bowl in hand. Naturally, the fact that Pakistan has been here a dozen times before has given way to trepidation. For as everyone knows global lending institutions are not friends of the poor. Rather, they focus on bailing out governments and leave it to the latter to try and darn social safety nets even while continuing to stitch up those at the helm. Thereby leaving it to the state apparatus to take care of the most vulnerable.
The challenge for Finance Minister Asad Umar is to stop equivocating on the question of a bailout package — which have inlcuded such reckless statements about how the country can take or leave an IMF loan as well as dangerous projections regarding timeframes before which the begging bowl will not have to runneth over. What is needed now is concerted lobbying for the softest package possible. Economic experts here at home are urging that this be concluded at the earliest so that the cash will start flowing sometime next month. And they are right. There is no more time to lose.
Already, the Fund has called for Islamabad to ensure a primary surplus on its budget deficit as a precondition for bailout; keeping this within 4-5 percent of GDP during the duration of the proposed financial programme. Analysts warn that in real terms this will translate into: increased interest rates (by 13 percent) and electricity tariffs (22 percent) as well as a free floating exchange rate. Thereby forcing the government to effectively choose between slashing defence expenditure or else making additional cuts to the development budget. The news coming out of Islamabad is that it is half-in and half-out. That is, power tariff hikes have been green-lighted while the Centre is refusing to budge on the question of interest rates; arguing not unreasonably about the negative fallout on the broader economy. Another point of contention is tax revenue collection. The government wants to stick to around the Rs 4,445-billion mark whereas the Fund is keen to move this upwards to at least Rs4550 bn. In fact, currency control appears to be the only area of real agreement.