FINANCE MINISTER Shaukat Tarin finally specified the future direction that the country’s economic policy will take when he disclosed his intention to secure IMF relaxation in some of the harsh conditions linked to the Fund’s $6bn loan. In his testimony before a National Assembly panel, Mr Tarin, an outspoken critic of the IMF-mandated contractionary economic adjustments, was convinced that the country would be in deep trouble if the economy did not grow rapidly. “If we continue with economic stabilisation policies, there will be no growth, the absence of which is creating enormous problems for the country,” he is quoted to have said. According to him, the economy needs to expand by a minimum of 5pc a year to increase revenues, create jobs and check debt accumulation — public and power both. A plan to put the economy on the growth path is ready. The idea is to meet IMF targets and conditions by expanding the economy instead of suffocating it. The plan aims to boost public development spending, broaden the tax net and leave power prices where they are.
This course correction isn’t surprising. The prime minister had been under pressure from his party to break away from the stringent IMF conditions and give some relief to the people battered by inflation and unemployment. The situation worsened when the coronavirus gripped the world though temporary suspension of the programme provided some room for monetary and fiscal stimulus at home. The defeat of PTI candidates in the recent bypolls also bolstered party demands for a change in economic direction. The electoral losses are seen as an outcome of the government’s poor economic performance.
Mr Tarin’s assertion that Pakistan could no longer afford economic stagnation is spot on. With nations everywhere trying to support their economies through generous fiscal and monetary incentives because of the pandemic, it is unfair to think that a country like Pakistan can meet the IMF’s difficult targets without hurting the people and the economy for a long time to come. Continuation of tough adjustments such as a drastic increase in electricity prices and taxes, in addition to the constraints on government spending, at a time when a new Covid wave has deepened economic and investment uncertainty would be disastrous. Although the economy has shown signs of recovery from the impact of the pandemic since last summer, it still remains fragile and in need of a stimulus to return to the path of growth. The present growth momentum should be sustained. However, it is not possible without strong support from the IMF. It is time the Fund showed, in Mr Tarin’s words, “kindness” and afforded the economy and the people some respite. Flexibility shouldn’t be problematic for the Fund given that the government only wants to pursue a different strategy to put its economic house in order, without leaving the programme or abandoning its targets.
Published in Dawn, May 5th, 2021