Once more into the breach

THE first rule of economics, dressed up in fancy jargon as it might be in textbooks, is as apparent to gun salesmen in Darra as it is to Chief Economists: there is no such thing as a free lunch. Any appeal to the IMF, which we have all but approached for immediate financial assistance, to go easy on us, would violate the rule. It's no small change, after all, that we want from the Fund. If things go through, we are looking at about $5 billion in loans, a multiple of our IMF quota, $1.6 billion. This too at a time when a lot of countries the world over want to be helped out, even if it is money to be simply injected into their banking systems to create some liquidity. So the IMF is going to expect for all of its conditions, no matter how strict, no matter how little sense they make to local economists, to be followed down to the letter. First of all, there is the interest rate on the loans. Though there has been a variance in the projections of this in the local press, the PM's Finance Adviser himself has stated that it is going to be significantly higher than the deal we got in the 1990s, which is saying a lot. Then there is the insistence on phasing out subsidies. But that has already been pledged when we got our $1.4 billion from that other horseman of the apocalypse, the World Bank. The reverse (taxes) was not suggested; the IMF just might suggest it for areas as yet untaxed. After that, there has been much speculation over exactly what the IMF actually wants from us. It ranges from a say in determining how our next budget is to be drafted, which is pretty much the bulk of what finance ministries the world over do in the first place, to having its representatives in our revenue departments; not just as monitors but entrenched in its administrative set-up as well. It is sad that even the most wild of speculations is not beyond the realm of possibilities. To put these to rest, the government should ensure that there is transparency in disseminating to the public what exactly are the terms that the IMF wants. The President's recent announcement that the interest rate is going to be cut sounds rather strange since it is almost certain to go up, specially in the wake of the IMF programme. We want more transparency on this front, not obfuscation. Our current financial crisis, caused as it may have been by fiscal recklessness, was catalyzed to a vast measure by the war that we are fighting on American behest. That should count for something in the math of the loans.

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