Lawmakers meeting with IMF delegation
Standing Committees of Senate and National Assembly on Finance and Revenue had, in camera, joint meeting with the visiting staff level International Monetary Fund (IMF) delegation led by Ernesto Ramirez Rigo. However, the members of these committees afterwards shared some points with media. The parliamentarian of PML-N seemed more or less satisfied with the multilateral donor’s agency suggested economic reforms package under the Extended Fund Facility of $6 billion. But PPP law makers expressed reservation with fast track mode of enforcement of macroeconomic reforms and government move of centralizing the collection of sales tax on services, the powers of which had been transferred to federating units under 18th Amendment.
Senator Sherry Rahman of PPP, after interaction with IMF delegation, put the entire baggage of economic mess and miseries of common man on PTI government, enumerating rising inflation and energy prices, chronic stagflation, shortage of consumers’ goods, low production, massive unemployment and poverty. She contended that the entire roadmap of stabilization measures, including debt reduction, containing fiscal deficit and revenue mobalisation are not indigenously conceived. But historical facts about who ruined the economy cannot be swept under the carpet. It was in the first PP government of from 1972-77 that policy of nationalisation of industries and banks had given major blow to the economy. The recipe of mixed economy created the white elephants of hemorrhaging public sector enterprises, which devour Rs.400 billion of taxpayers’ money every year with cumulative losses of 1.8 trillion and PPP opposes tooth and nail either outright privitisation or rightsizing of loss making state entities.
It was in the second Benazir Bhutto government that energy policy of generating electricity from cheap, renewable and clean sources like hydel and wind was totally abandoned in favour of highly expensive thermal power generation from furnace oil. Power purchase agreements detrimental to national interest were made with IPPs, including the clause of 40 percent payment for idle capacity. These agreements landed the power sector in the vicious circle of circular debt. The IMF has now requested the parliament to pass legislation to amend the NEPRA Act, allowing automatic increase in power tariff.
It was in the governments of PPP and PML-N that autonomy of the central bank had remained restricted and subservient to the finance ministry in the pursuit of monetary policy. The bank was used as a tool for printing currency to meet extravagant expenditures. The legal framework of State Bank is strong but institutional framework is weak. It cannot restrict excessive borrowing by the government as envisaged in the State Bank Act of 1956. The IMF has now asked for amendment in this Act to ensure greater autonomy to the State Bank in the conduct of monetary policy.
If the manipulative practice of PPP and PML-governments is any guide then the multilateral donor agency suggested amendment may turn out counterproductive. It may result in rolling back of the legislative reforms of 1990s. The governments of these mainstream political parties had appointed governors of the central bank who had neither the required professional competence nor the courage and will to safeguard the exiting autonomy of State Bank in the conduct of monetary policy and rule of law. The present government may give assurance to give greater operational autonomy but will continue with the operational control of the central bank. Let us hope the incumbent government will succeed in carrying out the inevitable economic reforms to stabalise the economy and put it back on the path of turnaround and sustained growth.