MANY in the PTI government must have swallowed their pride to get the two controversial bills — one withdrawing tax exemptions worth Rs343bn, and the other granting the SBP complete autonomy — passed by the National Assembly to meet the IMF conditions for the revival of its $6bn funding programme.

Prime Minister Imran Khan, who had vowed to never knock on the door of the Fund before coming to power and ditched the multilateral lender last year because of its unpopular demands, had to sit through most of the seven-hour session to make sure no one from PTI or its allies voted against or absented themselves from voting. That confirms not every treasury member was happy with the harsh legislation.

Finance Minister Shaukat Tarin, who was initially confident of converting the Washington-based lender to his view till the country’s fast deteriorating balance-of-payments position forced his hand to give in to IMF pressure, has since been trying to keep up appearances. He has defended the Finance Supplementary Bill — popularly termed as ‘mini-budget’ — and the SBP Amendment Bill, dumping the blame on his predecessor and the SBP governor for acquiescing to the austere IMF conditions last year for a $500m tranche.

The negative inflationary impacts of the bill on the low-middle-income segments of the population cannot be overstated. The finance minister has himself admitted that the withdrawal of certain tax exemptions, which would directly or indirectly affect the common people, amount to Rs71bn, a hefty burden indeed. Earlier, he had said that such taxes amounted to only Rs2bn. Could this situation have been avoided? Opinion is divided. With the country facing an existential crisis on accumulation of massive debt because of chronic fiscal and current account deficits spawned by the state’s inability to tax wealthy lobbies and decades of the ruling classes’ profligacy, the government had little room to manoeuvre.

The recent attempt by the government to ditch the Fund and grow the economy rapidly ahead of the 2023 polls is enough to prove that we have reached a stage where even a moderate GDP growth rate of 4pc would upend the budget and external account. In the given circumstances, Pakistan’s re-entry into the IMF funding programme isn’t only important to secure its dollars. It is also critical to give ‘comfort’ to the other creditors — multilateral, bilateral and commercial included — that Pakistan remains a ‘going concern’ and that their money would not be lost.

Islamabad will not be able to exit the IMF in the medium term even after completion of the current programme. Once the present facility is over, it may be looking for another bailout from the lender of last resort since our ruling elites refuse to learn from the past, adopt a frugal lifestyle that suits poor countries like ours and pay taxes. We shouldn’t forget that even IMF dollars cannot help us for long.

Published in Dawn, January 15th, 2022