Home Editorial Editorial: IMF Compulsions and P.M. Sharif

Editorial: IMF Compulsions and P.M. Sharif

The incumbent government appears ill-prepared to reckon with both the demands of the IMF and the anger of a public already burdened by hefty taxes, utility prices

by Editorial

File photo. Saul Loeb—AFP

Speaking on the floor of the Lower House last month, Prime Minister Shehbaz Sharif made clear that the tax-heavy budget for fiscal year 2024-25 was made at the behest of the International Monetary Fund (IMF) in a bid to secure a fresh bailout from the global lender. The conditions imposed by the IMF have tied the government’s hands with regards to any potential relief measures, as most evident from the lender’s opposition to a Rs. 200 billion package aimed at reducing power-tariff for industrial consumers. The proposed Rs. 10.69/unit cut intended to reduce operational costs for industries, enabling them to be more competitive and export-oriented. The IMF’s unease, reportedly, stems from its impression that “hidden” subsidies for industries would pose an additional burden on residential consumers through fixed charges.

While negotiations between Islamabad and IMF have proven tough by all indications, the IMF’s refusal to even allow the government to make its own choices for relief point to the debt trap Pakistan is embroiled in, with the situation only worsening with each passing day. The IMF’s stance is that the country’s ballooning circular debt can no longer afford any subsidies on electricity, while the government maintains that without some rate cuts, the country cannot achieve economic stability. Authorities are also cognizant of potential civil unrest—as seen last summer—from members of the general public unable to pay the hefty electricity bills that have been on a constant incline for the past 2 years.

Unfortunately, there are no easy solutions. The government has indicated Prime Minister Shehbaz Sharif would soon announce a relief package for lifeline consumers utilizing less than 200 units/month, but this is unlikely to prove recompense for the heavier burden now imposed on anyone utilizing over 200 units. Industrialists, also, aren’t too happy with either the IMF-opposed plan or the status quo, noting big industries could face a heavier financial burden in the coming months. There is no denying the need for Pakistan to achieve stability and sustainability, but this cannot come at the cost of the impoverished masses. Whether P.M. Sharif and Finance Minister Muhammad Aurangzeb can achieve this—even under prior conditions of the IMF—could well shape how the public sees this government over the coming months.

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