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While the government continues to boast about its economic achievements, independent economists are not so sure. Speaking at an Aaj TV programme, former Governor, SBP, Shahid H. Kardar said that there were clear signals that the country is heading towards another crisis and whichever party comes to power after general elections in 2018, negotiations for a new IMF programme would commence. He blamed the IMF for committing "intellectual dishonesty" for not highlighting serious challenges in the implementation of reforms in the fiscal, external and energy sectors. Pakistan's economy was divided into two parts, with one doing well because of protection provided by the government such as the auto sector while the other was struggling to compete in the international market. The cost of doing business in Pakistan was very high which makes the country uncompetitive in the global market as compared to other regional markets. There are various factors for a decline in exports, including exchange rate, tax structure and non-payment of GST refunds. Tax structure is burdening the productive sectors and with refunds piling up, the country cannot compete globally. Tax structure is such that only those in the tax net are being burdened. No country except Pakistan has a legal category of non-filers which sends a message to filers that they have been unwise. Speaking about the increasing size of bureaucracy, Kardar revealed that when he was the Finance Minister in Punjab, total number of departments was 22 as against 48 at present.

The observations of Shahid H. Kardar at a TV programme, in our view, make ample sense. Pakistan's economy is certainly divided into two parts and the unprotected part is unable to compete at the global level. The output in agriculture is still heavily dependent on weather conditions and no efforts have been made to reduce this vulnerability. As most of the surveys suggest, the cost of doing business in Pakistan is certainly one of the highest. While most of the other governments provide all kinds of incentives to export industries, Pakistani officials try to create hurdles through various ways to discourage exporters and investors. Non-payment of GST refunds continues to be a big issue despite promises by the government to settle claims, creating shortage of liquidity in the industrial sector and consuming the time and efforts of businessmen unnecessarily which otherwise could have been used in productive processes. Input costs like electricity tariffs are not only high as compared to other countries but the availability of such inputs is also not guaranteed. The government's insistence to maintain the exchange rate at a particular level has also become a big issue in undermining the competitiveness of economy and the prospects of export growth. According to the former SBP Governor, Indian currency depreciated by 30 percent, Indonesia's by 38 percent, Malaysia's by 47 percent, S. Korea's by 7 percent, pound sterling by 13 percent and Euro by 7 percent between 2012-17 while the PKR appreciated by one percent. This shows that competitiveness of Pakistani exports has gone down over the last few years and there are no prospects of their expansion. In a situation like this, imports continue to grow and generally replace the domestically produced goods in the local market. The recent widening trade gap is a testimony to such an emerging trend. Shahid H. Kardar is also right about a separate official category of non-filers which does not exist in any other country. The creation of this category shows that filers and honest taxpayers are great fools. While the filers are overburdened and often harassed by the tax authorities, no worthwhile efforts have been made to bring the non-filers into the next net.

While most of the remarks made by Kardar cannot be disputed, his comments about the IMF seem to be overblown. To say that the IMF has been intellectually dishonest for not highlighting serious challenges to the economy is simply too much. The fact of the matter is that the Fund has been quite vocal in indicating the weaknesses of economy and non-implementation of reforms all along. The only problem could be that it employed language that contained mild admonitions but no strong strictures. As for going back to the IMF once again after the 2018 elections and negotiating another programme, the timetable specified by Kardar in that TV programme cannot be taken for granted. It will depend on the evolving situation in the external sector accounts and the level of foreign exchange reserves. If past is any guide, Pakistan usually approaches the IMF when its foreign exchange reserves fall to a dangerously low level.



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