April 8, 2002	Monday	Muharram 24, 1423

ONCE again, the United States has brought about a stunning collaboration between a third world military government it backs and a multilateral donor it controls to facilitate the military junta to win a referendum. The IMF has already been encouraged by the US over the last six months to ignore the three downward revisions in revenue collection target fixed in the current year’s budget in July with the Fund’s approval and in addition, approve in November, 2001 not only a more generous PRGF than the Fund was planning to give to Pakistan before September 11 but also to release the second tranche in March 2002.

Not only this. In total disregard to what was agreed between the Fund and the government on the matter of passing any escalation or de-escalation in world oil prices to the final consumer, the Fund in recent times agreed with the government when it did not let the windfall gain in oil import bill to be passed on to the final consumer in order to enable the government to make up the losses it was sustaining on the revenue front. Now with the decision taken to go for referendum to legitimise his hold on power for five more years, President General Pervez Musharraf is being allowed to reschedule the dates of all price increases under the PRGF agreement from the last quarter of the current financial year to the first quarter of the next financial year.

The government has already been allowed to partially withdraw the General Sales Tax (GST) imposed on medicine and has put on hold a Nepra approved increase in power tariff. Now comes the news that the dates for imposition of GST on cooking oil and ghee are being rescheduled to July, and that the oil companies’ advisory committee (OMC) has been asked to maintain the prices of POL at the current level for at least the next one month or so irrespective of the fluctuations in the international oil prices. Also according to reports the five-phased increase in OMC’s margin and dealers’ commission has in fact been dropped for one month.

The mention of these facts here should not be taken to mean as if one supported the IMF prescribed price increases and application of GST on food items and medicines and it is being criticized for allowing the government to postpone these price increases.What in fact is being attempted here is to throw into bold relief the fact that when the Fund is asked by its major shareholder to help out a third world military dictatorship, the Fund shells out assistance even if the recipient had failed to achieve the targets which, while being fixed, were considered by both the donor and the recipient to be the very minimum for attaining economic stability.

Indeed, when the government fixed, and the IMF approved, this year’s budgetary revenue target at Rs457 billion, most independent economic experts immediately came out with their own estimates and said that it would be a miracle if the year-end collection would cross Rs400 billion. Now with only two months before the year ends the IMF-government approved estimate puts the collection for the year at Rs.415 billion. But this figure too appears on the higher side and by the end of the year perhaps the CBR would be able to collect no more than Rs400 billion. If anybody knows Pakistan’s economy like the back of its hand, it is the IMF which over the years has become too intrusive in Pakistan.

Therefore, it should have known the real problems facing this country’s economy and refused to accept the CBR’s estimates for the year. But not only did it accept these figures but it also took the easy way out by putting more emphasis on prices increases, subsidy withdrawal and GST application on food items and medicines rather than give an ultimatum to the government to do something about the CBR, Wapda, the KESC and other such badly managed orgainzitions which according to the government’s own confession are losing more than Rs100 billion of the exchequer’s money every year.

Wapda is being run by a military general since 1999 and it is still dependent on tariff increases for its economic health rather than efficient production of power and its efficient transmission and distribution. The claim that it has brought down wastage from 40 per cent to 25 per cent is no more than empty rhetoric which every government since early 1980s has kept claiming but with the change of every government the incoming government goes back to the bench mark of 40 per cent. Even the so-called first ever successful IMF programme which ended in September 2001 starting in November 2000 came to its conclusion without Pakistan reforming any of these institutions but pushing up the prices of all the utilities and essentials which, however, did not help the CBR to fulfil its annual collection target as a result of which the public spending for development was drastically curtailed in order to achieve the IMF prescribed budgetary deficit target which still eluded the government but the IMF readily agreed to allow the government the needed relaxations but in the process the incidence of poverty increased manifold in these 9 months of the IMF programme and the overall economic recessions further deepened which was conveniently blamed on drought— a drought during which there was a bumper wheat crop!

The government was also forced to devalue the Rupee beyond its real value ( this became too obvious when it started appreciating in response to inflow of unearned dollars into the country and the government had to buy as much as two billion dollars to keep the rupee pegged at Rs. 60 to a dollar, otherwise it would have gone up to Rs 55 to a dollar). Devaluation was prescribed by the donor to help boost country’s exports which continued to remain pegged to $8-9 billion, But the devaluation added its own pressure on the budgetary deficit. In fact over the last 12 years during which Pakistan had entered into a number of IMF programmes, the Fund-prescribed devaluation of the Rupee was in a big part responsible for the ever-increasing budgetary deficit.

September 11 had not happened until the last month of the ‘successfully’ completed SBA programme, so why did the US encourage the multilateral donor to help out a military dictatorship the advent of which had caused the US itself to automatically impose some more sanction against a country already groaning under the nuclear and Kargil-related sanctions? Well, at that time the isolated military regime in Islamabad was being guided by its nose to Agra which happened in July and if the 9.11 had not happened things perhaps would have moved according to a timetable already put in place by former US president Bill Clinton to bring some kind of a final settlement between India and Pakistan which at least Pakistan would have accepted in return for a three-year PRGF programme.

However, the September 11 provided, both Pakistan and India, an opportunity to get themselves unhooked from this plan and try to exploit the new situation to promote once again their respective positions embedded in history. Now the US doe