Prime minister Shehbaz sharif,s budget for the present fiscal year has whipped up seething anger against his administration at home but won him a $7bn packages from the IMF to temporaily shore up an embattled economy .
An IMF statement says that it has reached a staff level agreement with pakistan on a 37 ' month Extended fund facility islamabad will be able to access these funds once the deal is approved by the IMF Executive .Board which is contingent upon the timely confirmation of necessary financing assurances from pakistan,s bilateral development partners '' ( read : china). The programme aims to capitalise on the hard won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finance reduce inflation
rebuild external buffers and remove economic distortions to spur private sector led growth,
while it was relatively easy for the government to cross the first birdge towards the agreement by imposing exceeding painful direct and indirect taxes on the urban and middle classes .the new programme targets will continue to test its commitment to reforms over the life of the deal .
for starters the IMF wants the authorities to go after the under taxed sectors and properly tax exporters retailers and agriculturists to continue fiscal consolidation and increase tax revenues through measures contributing to 3 .5 pc of GDP. The current budgets already aims to raise tax revenues by 1.5 pc of GDP to meet the programme goal of 1pc primary surpuls this year
another contentious condition relates to the abolition of agricultural supports prices especially for the staple wheat crop and associated subsidies it is pertinent to recall how farmers came out to protest after wheat prices plummeted sharply when the statement indicates that the government has aslo agreed to phase out incentives to special Ecnomic Zones and refrain from new regulatory and tax - based incentives or any tax based incentives or any guaranteed returns that could distort the guaranteed returns that could distort the investment landscape including for projects channelled through the army led SIFC to create a level playing filed for all businesses how it will affect Sifcc afforts to lure investment from friendly countries is anybody s guess other programme goals periodic power and gas price adiustment. SOE governance reforms and privatisation, transfer of more fiscal market - based monetary and exchange rate policies --- actually represent the unfinished agenda.of the previous programme the agreement has indeed provided much needed breathing space to the government, but it has also created serious political challenges for it.
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