Instead of prescribing to the government of Pakistan a difficult fiscal deficit year after year and seeing that being violated by the excess expenditure of the government, and then relaxing the limit annually, the IMF wants that regulatory task to be undertaken by the national parliament from now on.

And the IMF wants the parliament not only set the ceiling on the expenditure, fiscal deficit and overall borrowing for the year but also reduce the outstanding national debt. It wants the debt to be brought down from a very high 100 per cent of the GDP to a safe below 60 per cent within ten years from now. That means an average annual reduction in the debt by four per cent which is not too difficult for a healthy economy and a prudent government.

Sixty per cent of the GDP as the peak national debt level is prescribed by the IMF for most countries and is one of the benchmarks for admission of countries to the euro zone.

In addition to that, it wants the parliament to be fully seized with all taxation and tax exemption decisions instead of changes in taxation being made by the Central Board of Revenue through the highly controversial SROs.

As a first major step the IMF wants the parliament to do away with 55 income tax exemptions as a part of the new budget to be presented in June.

In the prevailing chaotic conditions in parliament can its members discharge their new duties diligently and effectively?

The law which sets the limit on public debt and official borrowing year after year is called the Fiscal Responsibility Law. The draft of the law was published in July 2002 to elicit public opinion and experts’ views. And the law was generally welcomed.

In fact, the late Dr Mahbubul Haq as minister for planning was a strong advocate of such a law and that proposal was widely welcomed. But the successive governments, advised such a check on them, did not make that a law. Hence it has been the IMF’s task to come up with the draft law, particularly after the total national debt had exceeded 100 per cent of the GDP and the country ran into serious debt servicing difficulties and had to resort to heavy borrowing to service the loans. And after 9/11 large scale reprieve has been obtained by re-scheduling most of the official debt particularly that sponsored by the Paris Club. Some of the new demands of the IMF, or old demands revived with a sense of urgency, are difficult for the government to implement. Among them is the demand to eliminate all exemptions from withholding tax on interest income which is to be implemented from June 30, this year. Pensioners, widows and others living on such incomes are in distres after their interest rates have already been slashed heavily, without a corresponding real fall in inflation for the middle income groups.

The government has also to establish a formulaic link between rates of return for General Provident Fund and the PIB (Pakistan Investment Bonds) which has been pretty low. That too has to be done by June 30.

Now when Industries Minister Liaquat Jatoi and other new ministers in the economic sector are talking of tax exemptions for investors, the IMF says that no new tax exemptions or special privileges regarding income tax, customs duties or general sales tax will be imposed except as anti-dumping measures and all time-bound exemptions and regulatory import duties will lapse without extension, except for existing contracts or exemptions based on international commitments.

Privatization of the Habib Bank, through the transfer of majority shares, too has to be done by June, 2003. Will the government be able to privatize the largest bank in the country smoothly within the next three months?

Most of the demands of the IMF precedes the fourth review of the implementation of the Poverty Reduction and Growth Facility under which it is to give $1.3 billion over a three-year period ending June 30, next year. Evidently the IMF wants to clean up the whole financial system of the country before the PRGF programmes ends. Mr Shaukat Aziz, Advisor to the Prime Minister on Finance, has been saying Pakistan will not have another IMF programme after this that has been found to be too constrictive and at times humiliating.

But if the proposal or demand to do away with tax exemptions on interest earnings from national savings will alienate the people, reduction of interest payment on provident fund deductions will affront the government employees.

The withdrawal of 55 income tax exemptions overall will alienate trade and industry, including possibly the exporters, at a time when we want them to invest more and more and create jobs and accelerate economic growth.

The IMF demand means the assurances being held out to investors, trade and industry by Industries Minister Liaquat Jatoi, Advisor on Investment to the Prime minister Abdul Hafeez Shaikh and Commerce Minister Humayun Akhtar may have small validity or efficacy.

Another difficult but legitimate demand is for the government to prepare a strategy to reduce the scope for abuse of holding ownership under different names (benami ownership), and that has to be done by March 31 that means within a fortnight.

The IMF also wants Wapda prepare revised financial improvement plans for the left-over part of the current financial year as well as next year aimed at reducing Wapda’s deficit substantially. But Wapda is hit hard from many directions. On one side the price of furnace oil has been rising and on the other side the government has been refusing to increase the power tariff to make up for the loss of revenue. And the federal and provincial governments and other institutions have to pay Rs 33 billion to Wapda. So it is unable to collect such large dues. And it is forced to come up with the 10th Wapda Bonds for Rs5.5 billion and pay interest on them.

The World Bank too is interested in the financial rehabilitation of Wapda before giving further development loans and a meeting was held on Monday with Minister for Water and Power Aftab Ahmed Khan Sherpao in which the World Bank representative urged the minister to help in the recovery of Rs 33 billion due to Wapda from official institutions. The minister promised to take up the issue with the Prime Minister and hasten the payment.

Any kind of financial improvement plan for Wapda is easy to make, but the difficulty lies in making it work, particularly when the large defaulters are official institutions whose power supply cannot be cut. An interesting or exciting debate will follow in the National Assembly when a bill is moved to do away with the 55 income tax exemptions which can hit a great many interests.

If the parliament is to have a more effective voice in the area of taxation instead of the finance minister having his way all the time, its members have to work hard and the standing committee of the ministry of finance has to work hard and the standing committee of the ministry of finance has to work harder after the right members had been selected to it. If the Parliament will not do its job the donor agencies will dictate their terms and foreign banks, which lend money can lay down the law when Pakistan tries to raise money abroad, which it may have to do at times despite its over 10 billion dollar foreign exchange reserves.

What is obvious is the previous period of financial profligacy, which has been partially arrested now, should be followed by a period of financial discipline and fiscal prudence under parliamentary supervision.