We’ve Heard This Before

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Finance Minister Shaukat Tarin’s assurance that IMF need not worry about the prime minister’s recent relief package–because neither the budget deficit nor borrowing would increase–is not very reassuring, to say the least. It’s also no surprise that he drenched his statement about whether or not the Fund was consulted before the announcement in ambiguity; saying the matter was discussed “as much as possible” because it’s not very likely that the global lender would take such a sharp u-turn so soon after arm-twisting the government to eliminate subsidies and raise taxes. Besides, slashing petrol prices by Rs10/litre less than a fortnight after raising them by Rs12/l would imply a lightning speed of talks; if indeed any took place in that time.
There’s also something to be said about the minister’s optimism about adopting the line that “the government would tell them (IMF) that the people are already on the streets, so the Fund should show some leniency; otherwise, more people would be out on the streets against the government.” IMF is, after all, the world’s leading international lender and provides financial relief to the poorest of poor countries, which means it comes across such situations more often than not. But since it’s a purely financial, particularly lending, institution, its cold-blooded structural adjustment doctrine leaves precious little space for political, or even humanitarian, concerns.
It is, of course, very likely that the government has its way at the end of the day. But in an environment where Brent crude is on a steep rise because of more than fundamental factors, it is going to cost the economy very dearly to keep local prices frozen. And that will surely affect the deficit, contrary to the finance minister’s expectation. Eventually, the people will pay for it through higher taxes and higher inflation. So far, during his days as the finance minister this time, Shaukat Tareen seems to have developed a habit of making promises that cannot really be kept. He said at the time of the budget that he’d make the IMF understand the necessity of an expansionary fiscal policy. He did not succeed. Then he said that there would be no new taxes and definitely no mini-budget. But both things happened. So, this time, as he makes yet another bold promise, the people should at least be forgiven for saying that they’ve heard this before.