The IMF's call to tax the rich and shield the poor in Pak will not be easy to implement
Pakistan's dwindling economy has steadily dug its way into such a morass that even sane, helpful and logical directions from the experts outside, the International Monetary Fund (IMF) in this case, do not seem to be able to pull it through. The recent call by IMF Managing Director Kristalina Georgieva to Pakistan for increasing taxation on the wealthy and protecting the poor is a stark reminder of the country's economic woes. The cash-strapped nation, which secured a bailout from the IMF in July, is grappling with double-digit inflation and a range of structural issues that need immediate redressal. Kristalina's meeting with Interim Prime Minister Anwaarul Haq Kakar on the sidelines of the United Nations General Assembly session has brought the pressing economic issues facing Pakistan to the forefront. Kristalina emphasised the need for Pakistan to collect more taxes from the wealthy and simultaneously protect the country's vulnerable populations. The IMF has long been advocating economic reforms in Pakistan. Pakistan's economy is reeling under soaring inflation, which has been exacerbated by the conditions attached to the IMF's $3 billion bailout package. Meanwhile things have only gone from bad to worse for general population. Massive hikes in electricity and petrol prices have driven inflation to a staggering 27.4 per cent last month, placing the citizens under a crushing burden.
The promise of economic stability and growth through the IMF bailout has not yet materialised for the majority of Pakistanis. The IMF's insistence on revenue collection and protecting the most vulnerable segments of society underscores the importance of a balanced approach. But the irony is that this bailout, and even the previous ones, have hardly changed anything. The ordinary Pakistani continues to suffer while the Pakistani elite (especially the army) enjoys the privileges. These measures are essential not only for fiscal sustainability but also for maintaining social cohesion in a country facing considerable economic hardships. The IMF's approval of the $3 billion standby agreement, which is crucial to prevent a sovereign debt default, has saved the day but the crisis runs deeper in Pakistan's system. It must galvanise and upgrade industry and trade to compete in the international market. But it is resorting to piecemeal reforms such as earmarking 10 Government-owned companies for privatisation. Though this move is in line with the IMF's recommendations as State-owned entities' losses have been straining Government finances, it is not a permanent solution. Pakistan's economy needs structural changes that can create a conducive business environment. The IMF’s prescription may not be easy to follow as Pakistan's elite is going to resist it tooth and nail, especially with the general elections slated for January end. In the short term, however, such moves can play a pivotal role in steering Pakistan away from the brink. The path ahead is challenging as it is directly linked with the survival of Pakistan as a State.