The document discusses Pakistan's economic situation and criticisms of the IMF. It argues that Pakistan lacks direction in its economic goals and keeps making the same mistakes in budgets by overtaxing certain groups and not broadening the tax base. It also criticizes the IMF for its rigid, top-down approach but acknowledges that Pakistan's own elite-driven bureaucracy and politicians are also responsible for economic problems. The document concludes that Pakistan needs governance reforms focused on sustainability, accountability, analyzing revenue policies dispassionately, considering the poor, and reducing reliance on indirect taxes that burden the masses.

1. Don’t Take IMF Seriously?
Kashif Mateen Ansari Published Jun 17, 2023
“Alice in wonderland” is an all time classic and one of my favourite
books. It is about the story of a wonderland where animals talk and
much more, and I am amused at the relevance of many passages to
our situation. One of my favourites is: Alice asked the Cat, who was
sitting in a tree, “What Road do I take?” The cat asked, “Where do
you want to go?” “I don’t know,” Alice answered. “Then,” said the
cat, “it really doesn’t matter, does it?
We must know where we want to go to be able to find a road to take
otherwise it doesn’t matter.
Quite true in our current predicament of national economy, where
we find it increasingly hard to make up our mind what we want to
achieve with this pure nation of ours.
Do we want a nation that prospers in the long run with national pride
and a population whose aspirations are fulfilled, and basic needs
met with dignity, or we want to be a pariah state that lives in the past glories with no regard to the current
situation. Do we want to serve the elite that have captured and squeezed the last ounce of life from this
land, or do we want to come with a country that believes in the ideals of justice and equity. Unfortunately,
lack of direction seems quite evident because we don’t know where want to go and for this reason, we
are always confused what direction we must take.
A case in point is our current economic situation and the budget we have presented. Unfortunately, while
we can write reams and reams of paper to point out what is wrong with this budget but critique on
previous budgets was also almost the same.
We always try to tax those who are already taxed thus increasing the burden on the documented economy,
with almost no effort to bringing into fold who do not pay any taxes. This incentivises tax evasion and
undocumented economy. This has been the case in all the budgets that I have keenly analysed or observed
presented from all sides of the political spectrum: the good, the bad and the ugly. There has been no
budget in my memory that would have served the core purpose of broadening the tax base, bringing in
the real money makers in the tax net or reducing the impact of taxation on the poor. Rather we have
systematically increased our reliance on collection through indirect taxes as these are much easier to
implement and further, they do little harm to the elite whereas squeeze the masses.

2. Fact of the matter is we are making the same mistakes repeatedly and we expect different results every
time. We must be clear on what we want to achieve. Is it justice, dignity and prosperity for the masses or
a hunting ground for the elite?
Now to change the taste a bit let me put a different view on the IMF saga that has been simmering for
quite long and the IMF as an institution has made it amply clear that under the garb of a lender of the last
resort whose bidding it does. Today we will focus on why the IMF is bad for this country.
The IMF is a monster and there is no doubt about it; it has ruined many low-income countries and a lot
has been written about the harms it has done to developing nations and emerging economies and how it
has pushed millions into poverty through its straight-jacket approach where one size fits all is the rule.
In his book “The White Man’s Burden” economist and development expert William Easterly does criticise
the International Monetary Fund (IMF). He discusses the IMF’s function and expresses worries about its
expansion or “mission creep.”
Easterly contends that the IMF and other Western assistance organisations frequently use a top-down,
technocratic approach and push universal answers on poor nations without considering the unique
circumstances of each situation. He argues that this strategy undercuts the decision-making and agency
of recipient nations, resulting in unproductive and unsustainable outcomes.
One part of Easterly’s criticism is the idea of “mission creep.” He contends that the IMF has expanded its
function beyond its basic purpose since it was founded in order to support financial stability and offer
emergency financial aid during balance of payment crises. According to Easterly, the IMF has taken on
other duties, including lobbying for governance reforms, structural changes, and policy reforms that are
outside the scope of its core competencies and might not always be in line with the unique requirements
and circumstances of certain nations.
This mission creep can have unexpected repercussions that’s why he promotes a more bottom-up,
inclusive strategy that places an emphasis on local ownership, collaborative decision-making, and
increased responsibility.
I am not sure, but it appears the IMF has gone quite far when it comes to the assessment of this mission
creep where instead of lending a helping hand it has started commenting on things that were never part
of its remit.
Having said all the above, I believe IMF bashers would be quite comfortable in supporting any argument
we make here about ditching any prospects of parleys with the IMF and going our separate ways. But
unfortunately, the world doesn’t work in a binary; there are shades and shades of versions in between two
clear extremes. We must understand that while the IMF has faced a lot of criticism due to its rigid approach
and top-down models and disregard of the ground realities but to be able to chart our own way forward
we must be able to stand on our feet and see ahead; unfortunately, that’s not the case.
We must understand our ground realities ourselves before we start lamenting the lack of this
understanding by the IMF. Why we do not understand that we need to cut wasteful expenditure. It would
not take an economist to see where we are wasteful, starting from the grants that we approve in the
budget about the helicopter fleets for the mighty politicians or the cavalcades of jeeps and SUVs for all the
magicians who can change the plight of the people just by talking.

3. We must understand that we need to ease out the burden on the taxed classes that is salaried class,
corporates and the poor (through indirect taxation) and broaden the tax net by pulling in unproductive
real estate (here the catch word is unproductive in the form of plots, not the construction that genuinely
generates economic activity), traders and agriculture.
Why is it so hard for all the babus and the politicos to understand that taxes can grow if you create a
conducive environment for business growth; and taxes are bound to grow with the growing pie of
profitability. Instead, an easier path is taken where only burden is increased with increasing complexity,
driving out any willingness of the business to be ready to join the disadvantaged ghetto of taxpayers.
Any business that is outside the tax-net, enjoying the freedom and the money, why should it come in the
net where this is a trap that entangles you and extracts from you without giving anything back.
So yes, the IMF is quite devilish in its straightjacket approach and lack of understanding of the ground
realities, but our elite-fed bureaucracy and politicians are also in the same boat. For them the answer of
not finding bread for the poor is to advise them to eat cake.
Enough of this criticism, what should be the way forward? First and foremost, governance, which means
creating policies and mechanisms that would promote sustainability in our economic policies leading to
self-sufficiency and accountability for those who burn precious national resources to gain political support.
If there can be a charter of democracy for mutual safety of political parties there must be a charter of
economy to safeguard from any economic misadventure, keeping the debt raising capability of
government under check where it must not exceed the sustainable levels.
Holding FBR responsible on the matrix of improving the reach of direct taxation instead of merely chasing
targets in numbers that could be easily achieved by arm-twisting the existing taxpayers is no solution.
Governance also includes analysing our revenue policies dispassionately and separating the grain from the
chaff, to see what worked and what has harmed the economy.
Think about the poor and ground realities: why big businesses (traders, doctors, professionals in practice,
dealers) are not paying taxes and how to make them join the tax net.
Making this “tax net” just a name not a fishing net that is used to fish and then strangulating the pray to
death. Removing difficulties for the taxpayers and making the laws, rules and procedures customer friendly
with very limited scope of exploitative discretionary powers of the taxman.
Reduce reliance on indirect taxes and increase direct taxation. If we do a study, we will find that we have
systematically reduced tax burden on the rich and increased it on the poor.
Remove indirect subsidies to the rich like below cost provision of power, electricity and water. Currently,
as a nation we are not paying the full economic price of any of our resources and those who consume
more benefit more from this indirect subsidy. A case in point is unbridled extraction of underground water
that is prevalent without any planning and no payment for the use of that resource. So, the rich who could
afford would extract all that they need and more to squander whereas poor will face acute water shortage
due to the crumbling public access systems.

4. Same is the case with electricity and gas; we must have to start paying the economic cost of the resources
we consume. Only the poor must be given any subsidy.
The irony is that I try to write against the IMF but all what is part of that criticism stands true for my
indigenous economic managers also, which gets me into a bind as to who should I hold responsible for our
current economicmess. Wemay not takeIMF seriously,but we must be serious about our country’s future.
(The writer is a Harvard Alumni and tweets as @kashif_m_ansari) also the
writer is CEO of a wind power project and can be reached at kashifmateenansari@post.harvard.edu