The International Monetary Fund has been demanding withdrawal of Rs100 billion in power subsidies given to the export-oriented sector and additional taxes on power sector. The fund wants to fully close the Rs952 billion power sector shortfall through an increase in electricity rates. The government side has made an effort to persuade the IMF team that paying the entire amount would be difficult. According to report, Rs50 billion in power subsidies have been given to the export sector. A significant obstacle during the technical-level discussions was the power industry.
The plans and proposals prepared by the government have been deemed inadequate. The lender does not appear to be in a mood to soften the conditions attached to the loan. The IMF has already presented its nine tables on fiscal, energy, gross financing requirement, monetary and other areas. Since all other choices have been exhausted, the government is left with little choice but to accept the IMF numbers. The IMF is aware that it alone is in a position to help Pakistan avoid default.
It is hardly surprising that the IMF’s firm attitude forced PM Shehbaz Sharif to acknowledge on Friday that the lender is giving his administration a difficult time in talks given the country’s desperate need for IMF dollars and relief from the crisis.
The PML-N-led coalition may come to regret accepting some of the terms, such as withdrawing the power subsidy for lifeline electricity users. However, it is important to emphasize that Mr. Dar is solely responsible for the predicament he finds himself in. The situation may not have been as dire today if he had avoided needless confrontation with the Fund and faithfully carried out the program agreed upon by his predecessor after months of hard work.
Despite such a precarious situation, the coalition government led by the PML-N continues to believe that suppressing Imran Khan and his party is the best course of action. As all lenders (whether friendly countries or the IMF) demand political consensus to steer the economy out of the crisis, the PML-N leadership’s approach of political victimization of the opposition will not do the country any favors. And how could any consensus be reached without involving Pakistan’s largest political party? No political consensus can be achieved without engaging with the most popular political leader (Imran Khan) in the country.
By claiming that a political consensus is required by the IMF and Imran Khan does not agree to it, the PDM government is attempting to pass on its incompetence to the PTI. Both the establishment and the government need to figure out what political consensus and clarity imply that the IMF is now adamantly demanding.
No matter whatever course the establishment and the government take going forward, the people, which is already trying to cope with skyrocketing price inflation and job cuts, will have to bear the brunt of what the PML-N led coalition government has done — or not done — over the past several months.
