PAKISTAN’S re-entry to the $6bn IMF programme is being touted by both the lender and the government as a demonstration of the authorities’ commitment to critical governance and economic reforms to support sustainable growth for job creation and poverty alleviation. Or at least this is what the communiqué issued by the IMF following the approval by the Fund of the second through fifth reviews of the arrangement seeks to tell us.
But what the IMF and the government are not telling us directly relates to the impact on citizens of ‘adjustments’ that Islamabad has already made or is required to make in the next few months. During the period between July 2019 when Islamabad signed the deal with the IMF and April 2020 when the programme was put on hold because of Covid-19, fiscal and monetary policy adjustments made under the programme saw the economy come to a virtual halt with thousands of people losing their jobs and several businesses closing down.
The resumption of that arrangement has prompted fears of a revival of that period. For instance, the IMF wants the government to continue its “prudent”, contractionary fiscal policy, which requires it to drastically cut its job-creating development spending, reduce its subsidy bill, as well as “reform” (ie raise) sales tax and income tax from the next fiscal year for mobilising revenues to “achieve a lasting improvement in public finances and place debt on a downward path”. Who gets hit by these adjustments? Obviously, the brunt would largely be borne by the low-middle-income segments that have already been shaken by the hefty increase in electricity prices, food inflation, job losses and pay cuts. Businesses will also feel the impact.
The withdrawal of certain corporate tax exemptions worth Rs140bn has already caused unease in the corporate sector as it will hurt growth prospects and diversification plans of the companies. In return, it seems that the Fund is expected to condone the government’s inability to reform its corrupt, inefficient tax machinery or broaden the tax net and execute governance reforms.
There are also fears that the unprecedented powers, unencumbered by parliamentary oversight, for the central bank may limit the government’s capacity to help people and businesses. Neither the IMF nor the government has explained how most of the proposed adjustments (in the name of reform), which will further squeeze fixed-income households and put more pressure on taxpayers, will “help the economy, and save lives and livelihoods”. There is little doubt that these adjustments would bring a semblance of “macroeconomic and debt sustainability” in the near term. But the question is: do short-term gains justify the costs that people will have to bear in the shape of massive job and income losses in the wake of sluggish growth? Shouldn’t the government focus more on real reforms instead of cosmetic changes to qualify for IMF dollars?
PPP’s politics
IT comes as no surprise that the Islamabad High Court has dismissed the petition filed by PPP’s Yousuf Raza Gilani to challenge the recent Senate election result. The IHC said parliament’s proceedings can’t be challenged in court, and also noted that the party has the option of tabling a no-confidence motion in the Senate against Chairman Sadiq Sanjrani. This suggestion of a no-confidence motion will no doubt rattle the PPP, as it will increase pressure on the party to prove its strength in the Senate. For the past two weeks, the PPP at every forum has said the Senate chairmanship slot was ‘stolen’ from it due to the alleged bias of the presiding officer who rejected seven votes ‘illegally’. Had these votes not been discounted, Mr Gilani, who was proposed jointly by the PDM parties as the opposition’s candidate for Senate chairman, would have won by a majority. But a lot has happened in these last two weeks in the opposition ranks that has changed the dynamics of the PDM. Therefore, the result of a no-confidence motion against Mr Sanjrani at this juncture will only further expose the fissures in the alliance. It appears the PPP is considering an appeal against the IHC’s decision. But, given the debate over the controversial seven votes, perhaps the party would do better to investigate how this mess was created in the first place.
If the PPP is serious about the opposition’s campaign against the government, it will have to reconsider its strategy to keep the alliance intact. As a starting point, it will have to withdraw Mr Gilani’s nomination as the leader of opposition. This may be the sacrifice the opposition needs to send out a message of unity, especially given the serious differences between the alliance’s key parties. The days ahead will be challenging, but if they approach the issue with political maturity, the opposition parties may be able to sit together and chart a way forward. The task is no doubt challenging. Aside from a common enemy, these parties have disparate views when it comes to objectives and strategy. The PDM’s existential crisis is underpinned by questions of what path to take; is the alliance adamant on bringing down the system, or is there room to discuss a more nuanced approach? Veteran politicians in the alliance have experience navigating such crises and should be able demonstrate whether or not the PDM will become a force to reckon with.
Hospitals’ management
THE wrangling over three major Karachi hospitals between the Sindh and federal governments continues, with both sides trying to retain control of the facilities. In the latest developments, the Sindh administration has sought an agreement with the centre to run the JPMC, NICH and NICVD after Islamabad issued a notification calling for setting up a board of governors to manage the tertiary care facilities. The Supreme Court had in 2019 given the federal authorities control of the hospitals, while Islamabad later said they would be returned to Sindh due to “financial constraints”. Now it appears a fresh move is being made to micromanage these Karachi hospitals from Islamabad. This tug of war has had a negative effect on the smooth running of the facilities as their management status remains ambiguous.
In this scenario, the suggestion made by the Sindh health minister in a letter written to the prime minister’s special assistant on health — calling for the signing of a management contract between the centre and Sindh to run the medial facilities — can perhaps provide a way for both sides to reach a compromise. The fact is that health is now a devolved subject, while the Sindh government has improved the running of some of its medical facilities, such as the NICVD. However, it is also a fact that the province’s basic health structure remains in abysmal condition. A mutually agreeable solution must be reached between the centre and Sindh so that the hospitals are run in optimum condition, and patients can gain maximum advantage from the public health facilities. Private healthcare is prohibitively expensive, and the masses have no other option but to turn to such facilities in the public sector. Therefore, both the federal and Sindh governments must avoid protracted legal and administrative battles over the three hospitals and reach a solution which allows the facilities to run smoothly and improve on their service delivery. Along with claiming ownership, the provinces must also strive to improve their health systems from the bottom up.
