Economy: Einstein Quotes, and More…

IRSHAD SALIM – We (not the people) and the IMF have started exchanging draft proposal of a formal agreement called ‘Memorandum of Economic and Financial Policies’. It will become the base for a three-year fiscal assistance again and again conditioned upon broadening the tax base (to reduce informal economy) and taking prudent steps to expand the formal economy. Such paperwork is a standard practice the latter follows and has been following with us hoping that results will (eventually) show up from our end. But the IMF (including Mr. Imran Khan this time) hasn’t been getting this one through:

Both of us agree to disagree that tax is a big No No in our country. We want the loan, and the latter is ready to give the bucks but on understandable conditions- it’s too ‘harsh’ though – it will invoke mixed emotions on the streets and the government doesn’t have enough votes to sail them through as legislation- others didn’t and couldn’t despite having enough majority. The demand is ridiculous but we’ll try again:

We have been asking for loans and the lending institution have been giving them, showing us that the same old problems still exist and have been throwing at us back the same set of solutions its team considers the best fit. The team thinks the effort is worthy. And we made mistakes before, we could also repeat them. That doesn’t mean we won’t try this time wholeheartedly even though others did not try even halfheartedly .

That the end must justify the means was our objective though. And we failed to check the laundry list. We did not put our best foot forward and let the chips fall as they may. BTW (By The Way) filing tax return or paying tax is a foreign slang (slur) among most of us- nearly 60 to 70 percent of us deal in cash and don’t want to be in the radar or cross-hairs. Other governments went along with this on,e as we had voted them into power. Get it?

Noted and acknowledged, but we are in denial even though we know we are now part of the global village which is fully wired- thanks to the worldwide web and WhatsApp, etc.

These governments used the loans (not us) and or may have abused it, we don’t know, don’t want to know, and we don’t care. The State now owes nearly $6 billion to the lending institution without these governments delivering on promises they had made. Still the party went on for us. So who really cares. We were the happy campers then and sort of grim-reapers now. Where are the happy campers now? By the way don’t judge us.

Using the famous 3-strike rule (first is accidental, the second is a coincidence, and the third is deliberate), the Khan-led government (third in a civilian albeit democratic government row) finds itself in the corner and answerable to many unanswered questions. He should have known that it’s coming. Asad Umar tried to do the damage control but was outsmarted, bruised. He probably believed:

He choose to become a loner amid the rest and has quite a bit of following among the silent minority though. This could have been his undoing, as most explanations and swaggering (he could not do) are done on a hostile electronic media miffed by ‘unjust’ cuts in government advert rates and their quantum doled out previously- it was not his cup of tea.

That’s what the narratives said then, but over the weeks the sliver on the cloud is showing. Fiscal part was taken care of. The economic part was most difficult given the informal laced with black economic ecosystem.

It is expected that the new loan sizeof $6.5 billion to $8 billion will add up to almost $12.5 million plus interests. We’ll find a way out eventually.

According to reports, the incumbent government led by PM Khan has
accepted most of the global lender’s demands — most of them are repeats though, which were not delivered by the loan-taking previous thought-leaders, terming them harsh for the ‘gharib awam’ (poor nation).

And for most of us, in cash we trust, like it or not for our own self-interest. We did not, we can’t and we won’t surrender even though we have been saying and we probably would keep saying yesss, yesss, yesss.

The country did not have any other option, sources in the Ministry of Finance informally told the media, but to concede to the IMF’s demands this (22nd) time again in order to remain afloat. Our real buoyancy though is our informal economy- much to the dismay of formal economy pundits including the IMF. It’s our strength and weakness depending on which side you are standing vis-a-vis the fishbowl we have been swimming.

Those who are not join the fringe club:

The IMF mission chief has reportedly highlighted the grave fiscal position of Pakistan and the privileges that various business and economic sectors enjoyed in the country. The withdrawal of these tax concessions and privileges are among the conditions that Pakistan has again been made to accept to secure the bailout package. So did the previous governments, and reneged later. They called these harsh and unpopular measures (just as being tractioned by some in the media now), vulnerable to social unrest, etc., etc.- these were conditions not fulfilled over a decade now.

To keep going with the status quo, interests and principal amounts in tranches were paid by robbing Peter to pay Paul until the classic jargon “the chickens have finally come home to roost” adorned the State like a necklace and its rough edges finally are showing up. It’s on the incumbent government’s neck too being on the frontline. Many say it’s hanging over both the State and the government like a sword of Damocles- a national security issue.

Two narratives have been stereotyped every time the IMF has been approached: a) IMF is imposing conditions on the country that are not sustainable in the longer term- they have their own agenda; b) apprehensions that because of the IMF’s tough conditions, the country might not be able to complete the program.

That creative financial accounting coupled with shot-gun approaches at massaging crucial formal indicators, the macroeconomic principles and vice-versa have a very short shelf life, our leadership always knew, but choose to ‘khair hay’ (it’s okay) for short-term goals at the ballot, quick-fixes, personal gains, plus huge appetite for mass misappropriations. All these peccadilloes have eventually put the watchdogs and enforcers run after the most wanted ones, but in the process some of them realize that they have their fingers in the jelly jar too. Meanwhile, the rest of us (complicit too) are pointing fingers one way or the other in a shot-gun approach also, and hoping something pristine if not miracle would happen. ‘Allah Khair Karega’ (Allah Will Bestow) many of us say.

As I have written earlier, whether the economy is under the bridge or over the bridge, let’s row the boat this time.

(The writer is a business consultant, analyst and Editor-in-Chief of PKonweb and DesPardes. He’s presently based in Islamabad)