IMF’s draconian measures to wreck the economy

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DNA

ISLAMABAD, – Former President ICCI Shahid Rasheed Butt on Tuesday said draconian measures directed by the IMF would destroy the economy that has recently shown some signs of recovery.

IMF’s insistence on increasing power tariff to ensure full cost recovery and boost taxes as per the agreed target of Rs4.9 trillion will reverse the recent economic gains, discourage investment and open floodgates for inflation, he said.

He noted that World Bank has already cautioned that Pakistan’s GDP growth in FY21 will be lowest in the region at 0.50 percent while inflation will be higher in the region at 12 percent which is worrying.

Shahid Rasheed Butt said that continued inflation has already eroded the buying power of masses while the government cannot afford to implement unpopular decisions but ignoring the IMF would keep the Extended Fund Facility programme suspended which is a very difficult option at this juncture.

He said that successive governments have ignored tax and power sector reforms for three decades and now the power sector circular debt has risen to around 2.3 trillion rupees posing a serious threat to the economy while tax administration has become dysfunctional.

Additionally, the government has not been unable to meet the tax targets it agreed with the IMF because it was unrealistic while the pandemic also made it difficult and strict measures on the behest of IMF will help the cash economy.

Severe contractionary monetary and fiscal policies contracted GDP most in the last 52 years but IMF would insist on tax targets which is amazing.

An attempt to energy raise tariffs and taxes would imply a further reduction in disposable incomes of households and would compromise the quality of life of the middle and lower middle income people and push millions more into poverty, he warned.

The government must find a way to access the next IMF tranche without hurting masses and economy as it would send a positive signal to concerned circles.