Shahbaz Sharif Government Deal with the IMF
Introduction
In today’s article, we are going to discuss Pakistan’s deal with the IMF and the perspective talks on the new deal. If we talk about the background, the last PDM government in Pakistan signed an agreement with the IMF for 9 months. It was a short-term agreement in which Pakistan had to get 3 billion dollars in order to avoid default on the external front.
New IMF Deal with Pakistan
Pakistan has expressed officially that Pakistan wants a new IMF deal which further consolidates Pakistan’s position. According to the previous deal, the IMF has demanded from Pakistan. IMF wants Pakistan to bring fiscal discipline. In that context, we saw three major developments.
- The Privatization push
- Expanding the tax base
- Decrease subsidies
The privatization push:
IMF is pushing Pakistan towards privatization. It has been on the card for the last many years. We will see these pushes in the shape of the privatization of PIA. it would start from the PIA but it would not end with that.
Expanding the tax base:
To increase the revenue, we have two methods. Firstly, we need to reform the energy sector. Along with that, we try to increase the tax net instead of increasing the tax rates. In this context, the government of Pakistan has announced some schemes for the real state sector. It is because largely the real state sector does not pay income tax.
Decrease subsidies:
The third major condition of the IMF was to decrease the subsidies. As a result, the gas and electricity prices are significantly increasing. Additionally, the levy on petroleum is likely to increase, which could be extended to 100 rupees per litre.
Political Aspect of IMF Conditions
This is a newly elected government. For the newly elected government, there is room for making unpopular decisions which can damage the political and economic front. They can afford to make these decisions.
We know that Pakistan’s common man is suffering. Also, we know that there is no proper opposition in the parliament because the top leadership of the opposition are in jail. Therefore, if popular unrest is created then it will be easy to manage the government.
Now question could be again will these unpopular decisions be politically affordable in 2027? Considering the upcoming local elections in Pakistan in which the unpopular decisions can bite the government.
Secondly, throughout our history, the initial period of political parties in Pakistan was considered very good with the institutions. But in the last two, or three years, the political parties in Pakistan have developed friction with the establishment. Therefore, the history of Pakistan tells us that no government in Pakistan can sustain itself in the last 2, or 3 years of their power due to friction with the establishment.
Critical Analysis
So according to my opinion, this time we will be in a deal with the IMF and we will also make unpopular decisions along with the conflict with the establishment. So that could be a very difficult task. I believe this is the reason why some of the preparations are made earlier. Different technocrats were added to the government. It is generally believed that this was due to the pressure from the establishment. It is to avoid such decisions from the political leaders that can lead to a conflict with the establishment.
Additionally, the establishment wants to see such a government which acts independently of the party interests and works for the national interests of Pakistan.
This is all based on the calculations. This political scenario depends heavily on how the opposition is managed, and how PTI manages its politics internally.
Conclusion
In conclusion, the IMF deals will likely to add to the problems of the government. It is very difficult for a political government to manage such conditions and decision-making. It is because if government make unpopular decisions then it will be difficult for them to win the next general elections.