This is a startling headline that appeared in the Lahore news paper, Daily Times, which is owned by the family of PPP leader Salman Taseer who has fallen victim to religious intolerance. A signed despatch in the Karachi daily, Express Tribune also ran an identical headline to the report based on Pakistan’s former representative in the International Monetary Fund (IMF) board Dr Ehtisham Ahmad’s address to a seminar on tax reforms. The seminar was organised by the Institute of Development Economics and Alternatives (IDEAs). It is funded by the Open Society Foundation of New York. That could be the reason for Dr Ahmad to open up and share the inside-track, however unpalatable, it might be.
The report makes the point that IMF initially had refused to offer a Stand-by Arrangement for $11.3 bn in 2008 but yielded after intervention of the White House. The IMF had turned down Pakistan’s request saying ‘the economic managers lied on the promise of levying the value-added tax’. It had the mortification of seeing spiced up fiscal data once in the past. Also, the lender of last resort doesn’t want defaults on payments. The perception has now become a reality since even the Zardari government could not honour its promise of tax reforms in 2010-11 fiscal.
Since these disclosures are made by no less a person than Dr Ehtisham Ahmad, there is very little reason to doubt. The 2008 programme was approved on a plan prepared by Finance Secretary Dr Waqar Masood and the key element of Masood’s plan was that Pakistan would address the domestic resources mobilisation issue and generate additional tax revenues equivalent to one percent of the total national income for consecutive three years.
The IMF wanted Pakistan to enhance tax to gross domestic product (GDP) ratio to 14 percent from the lows of 9.0 percent till 2013 and reduce the budget deficit to 3.0 percent of the total size of the economy. But after two-and-half-years the programme is suspended due to failure in implementing tax reforms. “It is now a different IMF that will seek prior implementation of conditions before agreeing to a new programme,” Dr Ahmed reportedly stated at the seminar. In other words, Pakistan’s reputation is tainted. It will not have it easy to have another bailout programme.
During the course of his speech, the former IMF board official did some crystal gazing, fiscally speaking. He said even the Kerry- Lugar money is not coming without the IMF Letter of Comfort. He did not rule out the possibility of the US tying up the new loan programme with North Waziristan operations. ‘Yes, North Waziristan could be an American card, but now even the US has been finding it very hard to convince the IMF to release the withheld tranches’.
The value-added tax has since been rechristened as the Reformed General Sales Tax (RGST). It has not seen the light of the day as it too has become a political football; both the provinces and the Federal Board of Revenue (FBR) have opposed to the levy for their own sectional reasons. The Federal government of President Asif Ali Zardari has become a hostage to his own games of survival and is unable to make any meaningful moves on the economic chess board. His latest move of involving the business community to help arrive at a national consensus appears more aimed at pleasing the Brettonwood twin rather than halting the downward economic slide.
With the ISI implicated in every possible terrorist action, credibility of Pakistan depends on cleaning up her acts, and not expressing outrage. Also, as a reader said in the Express Tribune on April 26, it is time Pakistan realises that ‘deceit has not worked for us as a Nation’… and ‘might as well change for the better’. Lying is still prohibited in Islam!
