The IMF regime
Saturday, October 25, 2008
The IMF, which has over the past two decades lost dozens of customers as increasingly savvy nations quit its harsh regime, looks set to move into Pakistan. Other client nations have moved on, many in Latin America having already adopted policies that can more effectively improve the lives of their people. Talks between a team that includes the SBP governor and IMF officials are on in Dubai. Though the federal finance adviser bravely, if unconvincingly, continues to insist the $4.5 billion the country needs within 30 days could be obtained from other sources, and the IMF will be approached only as a last resort, it does appear the options for Pakistan are running out. Aid, in the form of instant cash, is not readily available from any quarter though another approach seems likely to be made to China during the prime minister's visit to the country.
According to a report in this newspaper, the IMF is likely to impose a set of extremely tough conditions in return for the $9.6 billion it is ready to lend for the next three years at an unreasonably high rate of interest. These include a 30 per cent cut in defence expenditure over the next four years. Though accepting dictation from a party that now holds the finance-strapped country in its grip is never pleasant, the fact is that this may not altogether be a bad thing. It is obvious to more and more people in the country that the enormous expenditure on defence that slices out a huge chunk of the budget must be curbed, if Pakistan is to invest capital in its poverty-stricken people and move to improve their plight. This is indeed the only way to build a stronger country. The most serious threat we face today to security comes in the form of militancy and this menace is largely a product of the immense socio-economic disparity we see everywhere. Investing in people, in their education, in their welfare and in their future can create a stronger, more united country. For the same reasons the IMF demands that the amounts given out as pension to thousands each year be limited and agricultural production be taxed may make economic sense. It also gives us cause to re-think our priorities.
But, as we all know from our experience over many decades, the IMF regimes tend to work against poor people rather than for them. The demands put forward by Fund officials in Dubai for an increase in revenues by expanding GST collection falls in this category. The increased costs of products on which tax is levied are of course almost always passed on to consumers. The impact of IMF demands for a cut in subsidies is already upon us. Still greater demands will be made, putting a firmer squeeze on hard-pressed people who, after the removal of the oil subsidy and cuts in power and gas subsidies are already finding life almost unlivable. The desperate plight of people everywhere is visible at workshops, tailoring outfits, photocopying shops where work simply cannot be completed due to the energy crisis and livelihoods simply cannot be earned. Thousands of those who can have already made their exodus from the country fleeing to lands where they hope for improved conditions of life.
In the existing circumstances, it is unclear what the government can do. Immediately there seem to be no options other than the IMF. But in the longer term it is imperative Pakistan's leaders take a hold of matters. This can happen only when they more genuinely commit themselves to the welfare of people and to the task of ensuring greater economic sustainability and stability. It is a dismal failing that a country with as many resources as Pakistan and with so much human potential should today have been brought to its knees on such a fashion, forced to turn to the IMF. The demands being made by the organization are, of course, in part bargaining chips. Some will, through the process of negotiation, be dropped or watered down. But despite this, the fact is the terms will be harsh. No nation reduced to the plight Pakistan faces today should expect more. Once again its people will pay the price for the folly of its leaders, who as yet show few signs of having recognized the gravity of the situation.
Power of parliament
Saturday, October 25, 2008
Acting as a body representing those who eight months ago voted it into power, the parliament, for the first time since it was elected, has moved on behalf of the people. It has called for the 31 per cent raise in power prices announced several weeks ago to be halted, until a parliamentary committee, which is to meet with officials of the National Electric Power Regulatory Authority (NEPRA) and representatives from ministries can try and chalk out a solution acceptable to all stakeholders. Media personnel and civil society spokespeople are also likely to be invited to attend the consultation. Till then, people who have received bills at the new rates have been asked to hold on to them till a decision can be made.
The move comes on the directions of the president and the prime minister, and in a situation in which thousands of enraged people have staged countrywide protests. The expression of public anger has been especially heated in Punjab, where people in towns across the province took to the streets for the fourth consecutive day Thursday, in some cases clashing with police. Some attempted to enter offices of power distribution companies where officials barricaded doors and took cover. The delivery of bills at the new rate has enraged consumers, who have faced the increase at a time when the supply of the commodity they are being asked to pay for has reached an all-time low. Cities face nine hours of load-shedding. In smaller towns and in rural areas the duration is often closer to 14 or 15 hours, if not more. Consumers have also complained that, as per a formula devised by power companies they are being charged an amount that exceeds the rate set even under the new rate. This allegation is denied by power companies, although there have been vague rumours of directions to this effect given from higher levels of government. The parliamentary committee must assess all these accusations before arriving at its decision.
The outpouring of public grievance onto the streets should demonstrate to government that there is a limit to how far, and how hard, people can be pressed. It is obvious that the new demand made on them through the dramatic raise in the price of power is impossible for most to bear. Many have already burnt their bills, unable to pay them. The message is clear. The government cannot hope to put its own disorderly house to rights by victimizing people who have in no way contributed to the creation of the mess in the first place. The intervention by parliament is welcome. One must now hope the committee that has been set up can truly act in favour of the people and devise a means to make power available at a more rational rate.