http://tribune.com.pk/story/904070/bail ... er-waters/
"Bailout programme: IMF, Pakistan relation enters deeper waters"
Pakistan and International Monetary Fund’s (IMF) relations will now test deeper waters as the Washington-based lender now expects Islamabad to start focusing on deep structural reforms, particularly in neglected areas of energy and taxation.
The upcoming approval of the eighth loan tranche of $506 million by the Executive Board of the IMF, which is tentatively scheduled to meet on June 26, will mark the beginning of phase-II that will focus on areas that Pakistan has so far failed to deliver in.
In a recent conversation with journalists, IMF Resident Representative in Pakistan Tokhir Mirzoev said the primary focus in the initial stages of the programme was on measures to stabilise the economy.
Key achievements to date include a low interest rate, low inflation, declining budget deficit, and higher reserve buffers.
After the stabilisation, the IMF now wants Pakistan to implement reforms in troublesome areas.
Meanwhile, progress on taxation reforms has been slow. In fiscal year 2014-15 budget, which is ending on June 30, the government withdrew Rs103 billion Statutory Regulatory Orders.
There was hope that the cost of tax exemptions that the government estimated at Rs477 billion by the end of fiscal year 2013-14 would come down to around Rs375 billion by close of this fiscal year.
However, the Economic Survey of Pakistan that the Finance Minister launched early this month revealed that instead of coming down, the cost of tax exemptions has gone up to Rs665 billion.
Out of Rs665 billion tax exemption, the cost of sales tax exemptions was Rs478 billion, according to the survey.
An amount of Rs389 billion was lost due to exemptions given to industries under the sixth schedule of the Sales Tax Act.
An amount of Rs286 billion was lost at the domestic stage and another Rs103 billion at the imports stage. The IMF said it was examining the reasons behind surge in cost of tax exemptions.
When asked, FBR Chairman Tariq Bajwa did not have answer as to why the cost went up despite withdrawing the SROs.
Tax collection has been a long-standing concern. As against the original target of Rs2.810 trillion, the FBR will be unable to collect more than Rs2.6 trillion despite levying Rs360 billion additional taxes in a single year.
The IMF also considers electricity surcharges as important in bringing the energy sector closer to cost recovery. These measures are only part of the reform agenda in the energy sector.
1. First, is the IMF serious about "deep structural reforms" in the Pakistan economy? I doubt it. The IMF has been talking about deep structural reforms for ages and nothing has happened, and the IMF has not cut off Pakistan.
2. But assume that the IMF is indeed serious this time round. There is absolutely no way that Pakistan is going to make those reforms, and it will be seeking some way to evade having to make them. If we see IMF as an extension of the US, then either the other of the 3.5 friends will be approached to bail them out from IMF's clutches, or else Pakistan will cook up whatever crisis it has to in order to have "legitimate" excuses for delaying these reforms. In this respect, a crisis with India is the easiest instance of crisis for them to create.
I'm not so confident that all of Manohar Parrikar's talk, Doval's strategy and Army action in the North East will dissuade Pakistan for a moment from doing whatever it takes to deflect the IMF. I predict that if the IMF is indeed serious about deep structural reforms in the Pakistan economy, we will have a major terrorist incident with India in the near future.