Economic Gurus: No escaping the IMF
The government is quite mindful of the fact that uncertainty it is negatively hurting the economy, but the government is also trying to ensure that the IMF conditions do not hurt the people of Pakistan too much. So the government is making a decision based on whether people will be more hurt due to market uncertainty or by the IMF conditions. The government is also working on a Plan B; we have already received a commitment of $3 billion from the UAE and very soon there will be oil facility on deferred payment from the UAE.
In addition to what we received from Saudi Arabia, this will reduce our dependency on the IMF. We still may have to go to the IMF for a letter of comfort, but due to Saudi Arabia/UAE’s support and possibly some Chinese support, which is in the pipeline, if it gets materialized then, of course, the government would have a minimum need to go to the IMF. All the economic reforms the IMF wants the government is also committed to, be it in the energy sector or reducing the fiscal deficit, by curtailing import and boosting exports and expanding the tax net.
The government is making a decision based on whether people will be more hurt due to market uncertainty or by the IMF conditions.
These entire reforms lie quite close to what government policymakers have been doing on their own pace and time duration, while IMF would like to do it at a faster pace and in the minimum time, however, that would be a painful process for Pakistan in terms of people and the economy. My personal opinion is that we should go to the IMF, despite the Saudi, UAE and possible Chinese assistance, because in order to engage with other multilateral donors, the Asian Development Bank, the World Bank or others.
I would even recommend that we float bonds on the open market, we need to have a letter of comfort from the IMF, that will actually guarantee our economy is sound enough so that investors can invest or creditors can provide credit to Pakistan. Hence for that purpose, I would recommend that we should go to IMF, even if for a very short amount and duration so that we can stabilize our macro-economy. That new taxes in the wake of an IMF program will affect the common man, this is exactly why the government is delaying going to the IMF.
The government is mindful of the fact that it would have to raise taxes to increase revenue. The delay which has been going on since the last four months is because the government has still not finalized its ‘package’ with the IMF, for precisely the reason that it would be hurtful. The government wants to minimize this pain to the common person. When it comes to broadening the tax rate, I think the tax rate should be expanded.
So in order to raise revenue, we can either tax our existing taxpayer or we can bring back those whose income or revenues are above the threshold and are not paying any taxes, we should rope them in. The last question is then a lot of people complain about the complicated tax filing system. People have, at many times, called upon the government to simplify the tax filing system, because it is too complicated As part of the government efforts to widen the tax net, tax return filing system should be simplified.
As far as my information is concerned, the finance minister and state minister for revenue are already aware of this factor. They would very soon present comprehensive reforms in the Federal Board of Revenue’s tax filing system. The sooner it happens the better it will be for the people as well as the government.
This article was originally published at:
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.