Convergence of Pakistan and IMF Reform Agenda

It is in voguefashioning these days, everyone loves to talk about reforms. Reform

agenda is so wide spread is that it includes all aspects of governance, economic and
social life. Go around any seminar in the city or the world and you will find a bunch
of experts cursing the existing system and proposing reforms. A number of ideas are
prevalent in the market. Ideas start from liberalizinged economy, reforming the tax
system, tuninge the trade policy, opening governance, making participatory
governance participatory and accountable , accountable governance, introducing
environment friendly and, pro-poor policies etc., and goes on. Economic reforms
attract more attention as theyit deals with the day to day needs of the common
people. Favorite tools to achieve the goals includewould be training, hiring excellent
resources, and a bunch of consultants. State of play is not different in Pakistan and,
the debate was further accelerated when PTI came into power as a result of 2018
election.

PTI is giving the impression that they are on top of the task. They are trying to
reform the fundamentals ofr economy and governance for improving the overall
standards of living.better life. They have, therefore, constituted different committees
and task forces to look into the issues and suggest possible way outs for achieving
the results. However, the government is still stuck in overcoming the worsened
economic fundamentals of economy. Inflation is still high, unemployment is
haunting the government, trade deficit is quite high and the industrial and
agriculture revival are yet to start. Although some experts believe that stability is
coming back but at the same time GDP growth is expected to shrinkbe shrunk.
Decline in GDP growth rate would definitely negatively impact the efforts of
government.

IMF is also visiting Pakistan to negotiate the deal. It will come with its owna set bag
full of reforms. IMF will try to make sure that government is following its
instructions and the proposed set of reforms. From 1988-89 onwards, Pakistan hasis
already been on the path which had been designed by either by the IMF or the
World Bank orf other international financial agencies. The fFirst structural program
came with a list of reforms covering many aspects of micro and macro indicators of
the economy. Pakistan has been working to fulfill the obligations of international
agencies. Pakistan revised the prices of utilities including gas and electricity under
those instructions fromof the international agencies. The cCountry also drastically
reduced the subsidies to these sectors. Agriculture sector also got impacted under
the reform agenda proposed by structural adjustment program of IMF.

Despite all the previous reforms and instructions of the international financial
agencies Pakistan’s economy is still suffering. Pakistan is still struggling to maintain
decent growth but with very limited success. Un-employment is on the rise and,
only CPEC has helped to keep it at an affordable level. Major economic activities at
present are connected to CPEC in one or other way.
AgainstIn this backdrop, how can Pakistanis can expect the new reforms proposed
by IMF or introduced by government towill work?. What would be different this
time, which we missed in previous periods?. How Pakistan will avoid the previous
mistakes?. However, the most important questions are, first, what would be
converging point of IMF and government reforms;, second how government will
carry on its agenda which it promised in its manifesto and thirdly how the reform
will impact business community and common people?.

Convergence of reform agendas of Government of Pakistan and IMF would be a

difficult task. Experts will have to closely observe; what IMF is offering in the reform
packages and what is the reaction of the government. IMF is very critical on
subsidies and the current, prices of some utilities and commodities. IMF also is also
not satisfied with on the management of foreign exchange rate. It still believes in
further depreciation of rupee. It wants to bring exchange rate completely under the
market forces. It is feared that in this scenario Pak rupee will further depreciate.

Business community and common people are already facing the brunt of
depreciation ofin rupee. It has increased the problems of people. Purchasing power
of people is decreasing. Hike in utilities like gas and electricity is further aggravating
the situation. It is leading to less options for consumption of available resources.
Government has claimed that they are facilitating the business community to lower
the cost of production. It is a good initiative, but the problem is consumption market
does not have the capacity to accommodate the additional production. Main reason
is hike in prices and the lower or no increase in earnings. Second thing is that
Pakistani products are not still very competitive in international markets. A fFurther
hike in prices or depreciation in rupee will only complicate the situation. Inflation
will increase, and it will impact daily consumption patterns of people. It will leads to
a fall in demand and the industry will also be faceing problems.

The scenario is also against the manifesto of PTI. PTI claimed in its manifesto that it
will lessen the burden of common people and will strive for the creation of a social
welfare state. PTI launched Ehsaas program to alleviate poverty and to improveing
the living standard of people. It has also introduced the shelter homes in many cities.
It is also on the mission to reform the economy and the tax system. It is trying but
problems continue to existare still here. No doubt the government is facing these
issues due to historical baggage but time is moving very fast. Now people are
expecting some relief in their life not only good policies.

There is another point of conflict between government and IMF reform agendas. The
policies like poverty reduction etc. ask for increasing in the spending of
government, but IMF has a is with different mission. It wants to reduce the
government expenditures, increase earning through taxes etc.

So, the government and IMF will have to look for a common ground for moving
ahead. One option can be that both sides decide onto a road map to introduce
stringent measures with development status of economy. Utilities prices can be
tagged to increase in GDP and a decent rise in income of middle and lower classes.
Moreover, government can also negotiate a framework for gradual increase and
decrease in government spending. It can also be tag with income level of people. As
it is evident from the government priorities like poverty alleviation program,
government’s spending will increase.

Thirdly, government will have to take in confidence the business community about
the government and IMF agenda. Ideal situation can be that government builds an
alliance with business community to implement the reforms. Moreover, business
community can also be partners in setting the framework for economic revival.
Business community should be given the task to fulfil a certain level of contribution
in income generation and employment creation. However, the caution is that the
government should not only go for big business house it must also include the SMEs
and entrepreneurs. For that purpose, Pakistan needs a strong partnership with big
markets and economies.

Fortunately, Pakistan has athat cushion in the form China-Pakistan Economic

Corridor. Now CPEC has entered thein second phase which focuses onand
industrial revival is main element of second phase. Government has created a high-
level business council for accelerating the industrializing under the CPEC. It is a
good start to engage the real stakeholders. However, government will have to
convert this council into a real time body not just talk shop. In past these councils
havewere used only been used to pass the buck and not to do anysome serious
business. Government must give the task to council to develop and implement the
industrialization policy. It should not be confined only to suggestion seeking body.

It is a necessary step, as it will give the required breathing space to the government
and business community will own the process and the outcome. Government will
also have backing of the business community to face the IMF. It will give some
leverage to government to negotiate a common ground for convergence of reform
agenda of both sides.