IMF’s orthodoxy set to consign Pakistan to a low-growth trap: Report

New Delhi, Jan 4 (IANS) The IMF’s orthodoxy is set to consign Pakistan to a low-growth trap for years and without a fundamental rethink of the current strategy, and a change in the sham nature of the fiscal austerity being imposed, the economy will continue to be impaired for the long term, while ordinary Pakistanis will continue to suffer needlessly, a new report has warned.

Author Sakib Sherani writes in Dawn that since 2022, the installed government has imposed, under the watch of the IMF, “a crushing burden on ordinary Pakistanis via austerity policy”.

“A large fiscal adjustment has been carved out through massive taxation and cuts in subsidies instead of any hint of restraint in spending by the government either on itself or on its constituents and backers,” the report laments.

On the contrary, the spending valves have been opened like never before. Discretionary expenditure has skyrocketed, with public funds being lavishly used for patronage and cementing loyalties towards the making of a new political order, it argues.

In the process, the entire burden of adjustment has been placed on ordinary Pakistanis and tax-compliant firms.

“As a result, the country is experiencing permanent economic ‘scarring’, with businesses shutting down, unemployment surging, and nearly one out of every two Pakistanis now estimated to be below the poverty line,” writes Sherani.

For example, a cumulative fiscal adjustment of 5.5 per cent of GDP has taken place, the largest over a similar period in Pakistan’s history.

Much of this adjustment has come from new taxation measures.

The government has imposed taxes and levies totalling over Pakistani rupee 50.4 trillion since 2022-23 (including federal as well as provincial taxes and the petroleum levy).

“This is equivalent to the cumulative tax collection over the 17-year period prior to 2022. Repeating the past pattern of failure, the additional taxation has not come through tax broadening but by placing demands on existing taxpayers,” said the report.

The ‘development’ spending, a surrogate way of handing out taxpayer money to ruling coalition politicians, has surged from Rs 1.9 trillion in 2022-23 to a budgeted Rs 3.1 trillion in 2025-26.

“Expenditure on new fleets of cars, all-paid overseas trips for embarrassingly large delegations to different parts of the world, lavish spending on offices and official residences, etc, is on top of the foregoing,” the report mentioned.

The report further stated that either the “IMF is a witting party to this regime-supporting and system-legitimising operation, or it has been completely negligent in its fiduciary responsibility to ordinary citizens of a member country. Either way, it should be held accountable”.

Unfortunately, the IMF has chosen to turn a blind eye to the government’s spending profligacy and unwillingness to broaden the tax base, the report noted.

—IANS

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