Traders’ strike and IMF meeting

An IMF team is currently in Islamabad on a two-week long stay to review Pakistan’s performance on the $6 billion loan approved in March. Though there is a positive outcome expected, the visit has given the government an opportunity to ask the global financial institution to ease restrictions on the country’s financial systems.

The IMF team’s visit was also an ideal setting for a two-day strike by the trader community. They are irked by the new government policy requiring a CNIC on sale or purchase of over Rs.50,000 and the imposition of taxes based on an overall turnover. The business community also wanted to meet the IMF team, which didn’t materialize, but instead held a meeting with finance adviser Hafeez Shaikh and FBR chairman Shabbar Zaidi.

The two-day meeting’s conclusion seemed to have brought a win-win situation for the government and the business community. The government has not budged from the mandatory CNIC requirement but has deferred the decision till January next year; documenting the economy was a primary theme of the budget and retreating from this goal would send not sending a good impression to the IMF team.

The government has provided some concessions to end the deadlock which has jammed the wheels of the economy. Traders with an annual turnover of Rs100 million will have to pay 0.5pct instead of 1.5pct but would not be allowed to become withholding agents; the entire economic programme would be defeated if the government bowed to the traders’ demands.

The trader community has resisted the tax reforms being introduced to bring them in the tax net. The finance adviser has stated that out of 3.5 million traders, only 320,000 were currently being taxed. The only way for traders to compel the government to meet their demands is to observe a shutter down strike. They believe there is an IMF agenda in the country and have threatened to hold more strikes.

The IMF’s first quarterly report is expected by November 7, when the team will conclude its visit. Their departure is generally expected to end on a positive note. Some IMF officials have praised Pakistan’s commitment. They claim the country has generally shown good performance on most benchmarks. In such circumstances, traders should not attempt to tarnish the review report, while the government should not succumb to the trader’s unrealistic demands.