ISLAMABAD: Speakers at a webinar on Saturday said Pakistan would go through historic hard times in the future even after the bailout package agreement with International Monetary Fund (IMF) which is likely to be approved by the coming week. It would be a milestone that would pave the way for the release of an additional $1.2 billion in loans and unlock more funding from the IMF and other friendly countries.

They said Pakistan had to swallow the bitter pill but all the brunt of it shall not fall on the general public. All key stakeholders shall voluntarily come forward to take revolutionary economic measures to stop drainage of the national exchequer.

The IMF is demanding increase in the General Sales Tax (GST) by 1pc from 17pc to 18pc. The government is also proposing an increase in the Federal Excise Duty (FED) on purchase of business class air tickets and levy an additional 50 paisa FED per cigarette stick.

The demand for circular debt reduction will also have an impact on the energy tariffs which may go up by at least 25pc. The levy of GST on petroleum products is also being considered which will increase prices by at least 17pc. All of these will increase inflation and will further erode purchasing power of the masses.

According to a statement, the webinar was organised by Devcom-Pakistan on the subject ‘IMF-Pakistan Deal: Impact and the Way Forward’.

Pakistan’s former chief economist Dr Pervez Tahir was the keynote speaker.

The guest speakers included economist Dr Sajid Amin, Prime Economic Research Institute Executive Director Ali Salman, development economist from Sri Lanka Dr Rohantha Athukorala and others.

Dr Tahir said that with the rate of inflation at 27.6pc and expected to rise steeply, food beyond the reach of the poor and the lower middle class and fuel cost hitting even the middle and upper middle class, the common perception seems to be that things have to get worse before they get better.

He said the rich and privileged class must be taxed directly whereas the poor must not be targeted. In the past, governments got away with serious deviations and lukewarm reform efforts by pressuring IMF through the United States and European members of its board in exchange for services rendered as the most allied ally during the Cold War.

Dr Amin said the IMF deal will add more to inflation, hence, the government shall take necessary measures to prevent a large segment of the public from getting impacted by inflation.

There should be no politics on the economy rather all parties should have a consensus on the economic measures to avert a default-like situation, he added.

Ali Salman said what the government calls “tough and unimaginable” measures were not tough in real terms while some of them will fail to yield any substantial gains.

“They are not tough on the government and its institutions, which can recover costs and losses through more taxes and duties. They will continue to have free petrol and free electricity. The government shall withdraw tax exemptions provided to selected businesses, including those under the control of Army Welfare Trust. There is also need to withdraw subsidies provided to the textile and fertiliser sectors, and close down non-functioning Pakistan Steel Mills and sell out property and pay salaries from real estate investment instead of appropriation from supplementary grants,” he said.

Dr Rohantha Athukorala said that Pakistan was making the same mistake as Sri Lanka that delayed going to the IMF programme. Before the default, Sri Lanka was more dependent on external funds, having no sustainable internal growth model. Over expenditures and political instability led the country to a severe economic crisis.

Published in Dawn, February 5th, 2023