The contentious Finance (Supplementary) Bill, 2021 – dubbed as the ‘mini-budget by the opposition – is proving to be a thorn in the government’s way. After being bulldozed from the National Assembly, the bill now has to pass through Senate with just days remaining before the IMF meets to clear the next tranche of over $1 billion for Pakistan.
The government had pushed the bill as a prerequisite for the IMF’s loan agreement. The supplementary budget aims to end exemptions on sales tax and levy new duties as part of fiscal tightening measures. It was a pivotal endorsement for the economy, which is struggling with external and current account deficits, depreciating currency, depleting foreign reserves and rising inflation.
The IMF had agreed to revive the stalled $6 billion funding programme but demanded further budgetary tightening and central bank autonomy. The latter demand introduced as the SBP Amendment Bill, 2021 is even more controversial and has been equated to compromising on the country’s economic sovereignty.
Finance Minister Shaukat Tarin has termed the geo-political situation in the region and commitment of previous governments for the IMF being assertive. The economic team had to rush the bills in parliament and even appease its allies before the deadline of Jan 12 when the IMF’s board reviews the situation and approves the next tranche.
The surging food and energy prices have placed the government under increasing pressure in recent months as household bills have caused growing resentment among the middle class. The political ramifications will surely be felt in any upcoming polls unless the economy does not witness any significant improvement.
Pakistan has turned to the IMF 22 times over the past six decades and continues to do so. This implies that we are unable to bring structural changes to end the economic ailments. The reliance on loans aggravates the fiscal situation from which Pakistan cannot recover.
The focus on short-term solutions has placed Pakistan in a quagmire and a serious overhaul is required to bring us out of the system. Until then, Pakistan has no choice but to remain under the IMF programme and accept its dominance to prevent a full-fledged economic disaster.