Tag Archives: IMF

Pakistan’s budget: Policy sans public

Raza Rumi
Last week, a former Minister while referring to the budgeting process remarked how the budget documents were accessible to only 3% of the parliamentarians. A lady MNA whom I met after the budget speech was ploughing through the shabbily printed pink documents, looking for the allocations for regulatory bodies and both of us could not find the relevant figures. This should be enough to describe the inaccessibility and obfuscated nature of the budgeting process in Pakistan and several other developing countries.

Executive board-room syndrome
: Lack of public consultation in the budgetary processes is another hallmark of how the executive formulates the national priorities and finances them. Our state considers the people as ‘beneficiaries’ and ‘recipients’ of the wise decisions made in air-conditioned secretariats and donor board-rooms. This is why the economic and social policies are seldom reflective of the will of the people. Pakistan’s deep rooted authoritarian tradition explains this dilemma. But the civilian governments have rarely attempted to change this trend. More often than not, they also rely on the same evergreen bureaucrats. Our present elected government has chosen economic managers who are former international bureaucrats representing the good-old Washington Consensus.

Lack of participation:
Across the globe, pre-budget consultations are exercises seeking public support and inputs for policy. Countries in democratic transition are adopting participatory decision-making processes. There is also a growing consensus that budget decisions need to be subjected to public scrutiny and debate. Earlier, our government organized seminars in big cities and consulted the business, middle classes and other stakeholders to frame the policies. This time last-minute public consultations focused on the VAT issue. Quite obviously, for purely political reasons, these consultations have failed and we have a higher GST rate thereby more exposure to inflation.Development charades: The development allocations at the time of the budget announcement are almost always notional. Invariably these are slashed in the last quarter when fiscal crunch hits the government (40% in the last fiscal year). The new PSDP is Rs 663 billion but it remains to be seen if this will hold. How has it been estimated and prepared; only a handful of people know. The overall ceiling is guided by the NFC award. But, does it address the key development challenges? Perhaps not. Overestimated figures from the Friends of Democratic Pakistan were also factored in the previous years and even this year the allocations reflect what is expected and not necessarily what we have or need.

Lobbies who always win: As before, the big business, the landlords and the security establishment benefits from the limited resource base. The business lobby has avoided VAT at least until October, no mention was made of agricultural income tax in the budget speech and of course the defence budget is higher by 17%. The local vehicle-manufacturing industry will continue to enjoy protection. Much of the defence budget is hidden under the “General Public Services” category as the salaries and pensions are not reflected in the defence category.

Inflation will rise:
Contrary to various claims, inflation is here to stay. Higher energy prices and increased GST will lead to further increase in prices of commodities with a direct impact on the poor and the fixed-income groups. Apparently a study has been carried out to disprove the link between GST and inflation but it is not in the public domain. If and when VAT is imposed, inflation will further increase whether we like it or not.

Saving graces: Three key policies are somewhat promising. First, the focus on energy conservation, by providing 30 million energy savers, is a step in the right direction. The allocation of Rs. 40 billion for Benazir Income Support Programme and lastly the increase in salaries of the government employees are commendable policy decisions. It is not clear, though, as to how far the pay and pension commission’s recommendation was taken into account while finalising these figures.

Sterile debate:
Given the lack of budget awareness, the new gurus of Pakistani conscience have been holding endless talk shows on the budget. The commentary by TV anchors and their ‘political’ hosts is emotional and largely uninformed. Debate is good but spiraling ignorance is something that we must avoid. Similarly, the polemical statements in the National Assembly are intriguing. For instance, the leader of the opposition criticized the increase in government salaries for the adverse fiscal impact on the Punjab government, and at the same time lambasted the government for not doing enough for the vulnerable. MQM’s refrain that electricity should be cheaper in Karachi is also beyond logic.

Pakistan’s democracy is nascent and fragile. However, it is also an opportunity for the budgeting process to be reformed. The government should involve the media and civil society in raising awareness and building consensus on reform. In several parts of the world, accessible materials to increase budget literacy are commonly used. Similarly, it is time that the legislators are made more familiar with the budget process to enhance public oversight. Techniques that track inter-governmental expenditures can help reduce corruption and waste. All of this requires deepening of democracy, civil service reform and the emergence of a responsible media. We need a light year to get there.

First published in The Friday Times, Lahore (June 11 issue)

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Pakistan’s economy: Hard times

by Raza Rumi

Two years after the civilian government took office, there are few signs of economic recovery and this does not augur well for the fate of democratic governance in Pakistan. We are somehow doomed to bear the brunt of authoritarian regimes in social and economic terms. By the time a civilian government puts its house in order, the long and short marchers are ready to take over. The story this time has been no exception. Following the trends of the 1960s and the 1980s during the Musharrafian decade, unsustainable growth rates were touted as the raison d’etre for the apparent efficiency of a military regime. It is true that the Musharraf era inducted Pakistan into the globalized economic system, boosted domestic demand for consumer products and attracted huge doses of foreign assistance shortly after the military decided to ditch their erstwhile strategic allies, i.e. the Afghan Taliban. But it left the country in dire straits – bankrupt, politically polarised and mired in the worst inflation of our times.

The signs of economic fatigue and food inflation had appeared during Musharraf’s last year in power. An unprecedented energy crisis also plunged the nation into literal and metaphorical darkness and the global recession caused an economic slowdown all around. Consequently, from the high growth-rate of 6 percent, we were in the lowest growth category, even in the poor South Asia region. A 2.2 percent growth rate implies that our current population increase per annum is untenable. Similarly, the highest ever recorded inflation of nearly 25 percent in 2007-2008 also hit the fixed-income citizenry and the millions of poor, depriving them of basic sustenance. Continue reading

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A response to “The new East India Company”

This article is in response to the criticism of IMF in the earlier article titled “The new East India Company”. I am a critic of IMF’s policies but the earlier article ticked me off as it was based on populist aphorisms with no reference to economics or any stats. I was surprised that it was written by authors claiming to be professors at a prestigious business school, tax consultants and writers of several books.

 History

 In second half of 2008, Pakistan was facing a crisis. Shaukat Tarin came up with three plans notoriously known as Plan A, B and C. ‘Plan’ was a misnomer as in reality they represented a pecking order for our begging bowl. Plan A involved approaching Asian Development Bank (ADB) and World Bank (WB). Plan B consisted of approaching so called friends of Pakistan. Plan C was approaching IMF, the least desirable option. Continue reading

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The Timebomb Ticking in “Mini-India”

From the Wall Street Journal

Paul Beckett

Pakistan, he notes over green tea in his Lahore home, has a huge youthful population as India does: roughly 105 million out of 170 million Pakistanis are under 25 years old. It will be these people who drive Pakistan’s economy in the decades ahead. “Pakistan is a mini-India,” Mr. Shah declares.

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Pakistan: Conditions attached to IMF “bailout” will exacerbate slump and poverty

By Vilani Peiris at WSWS

The International Monetary Fund (IMF), in it first “bailout” of an Asian country during the current world financial crisis, approved a 23-month, US $7.6 billion loan to Pakistan last month in order to avert a current accounts crisis and Pakistan’s default on foreign loans. On November 27, the IMF released to Islamabad a first installment of $3.1 billion.

Under its emergency financing mechanism, the IMF has approved more than $40 billion in loans in recent weeks to countries such as the Ukraine, Serbia, and Iceland.

The conditions the IMF is attaching to its loan to Pakistan will severely impact the country’s workers and toilers. They include: eliminating all subsidies on energy, petroleum products, and fertilizer; slashing government spending, including “non-priority” development spending; and raising taxes. Continue reading

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No point in blaming the IMF – Part II

More from Dr Meekal Aziz Ahmed (NEWS)

A word about privatisation about which Mr Raza Rumi talks as through it was an unmitigated evil. Personally I have no strong views about privatisation but it is appropriate in some cases. Is there any reason why we steadfastly refuse to privatise PIA? None, except there won’t be jobs for the boys and all those freebees PIA staff, the defence ministry and the Civil Aviation Authority boys enjoy in those new slumber seats, bumping revenue passengers off the plane. Mr Rumi must have noticed that the first thing new governments do when they take power is to announce that PIA will not be privatised.

He resents the thought that the IMF will monitor the programme closely. Why shouldn’t it? The IMF does that everywhere with countries that use its resources, and in accordance with well-accepted procedures. They have a full-time resident representative office in Islamabad, established at our request and with our approval, and we are obliged to provide all data the IMF may need which is pertinent to monitoring the performance of the adjustment programme. Continue reading

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No oxygen in the IMF ventilator

More on the IMF debate by Mosharraf Zaidi

Being of Pakistani origin qualifies an IMF employee to be as much of a Pakistani economy expert, as being of Pakistani origin qualifies a child that eats a lot of Krispy Kreme doughnuts to be an expert in Pakistani child nutrition. That is, not very much. IMF economists that spend the better part of multiple decades prescribing bitter pills for poor countries should stick to pretending to know Latin American debt markets. The utter brazenness of IMF pensioners advocating an IMF programme for Pakistan is so typical, it makes the challenge of affecting change in Pakistan for Pakistanis like Raza Rumi, Masooda Bano, and Harris Khalique (among dozens of others), much, much more difficult. How are these Pakistanis supposed to take on conflict of interest in the public sector for example, when the loudest IMF-type “reform” voices are IMF employees or pensioners?

How out of touch are the pundits that are not only proposing Pakistan’s re-entry to the IMF club, but arguing for it vociferously, day and night, on television and in newspapers? Well, while the rest of the world is taking a moment to bask in the sheen of the triumph of ideas and idealism in Barack Obama’s election victory in the US, the freshest idea these guys can come up with is to drag Pakistan back into the same black hole it has been to eleven times before. How unrepentantly docile a response does an IMF programme represent? Consider this. Pakistan was chosen as a case study for the first-ever evaluation conducted by the IMF’s own Independent Evaluation Office. Why? Pakistan represents a unique country, which until 2002 had the longest-running relationship with the IMF in the world. No country to that point had spent as much time in board rooms with the IMF negotiating loans and conditionalities. Here’s what the IMF’s own evaluators had to say about the IMF and Pakistan in this report: “Serious doubts about the prospects of future implementation of the program would have had to be raised.” Continue reading

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