Pakistan has deindustrialized prematurely, manufacturing is growing at half the rate of its neigbours as is the rate of investment. Pakistan’s share in world exports had declined, 80% of the GDP is represented by consumption and reliance on imports has grown. The fiscal policy places disproportionate burden on a narrow base, high and non‐cascading tariffs undermine local production and tax collection relies on imports and withholding taxes. Smuggling, under‐invoicing and misdeclaration of imports is rampant. Poorly negotiated trade agreements fail to protect Pakistan’s interests. As a result, not only have jobs been lost, Pakistan’s external and fiscal deficits have grown. The PBC has been advocating a “Make‐in‐Pakistan” approach to reverse the trend.

The PBC appreciates that the government had to explore all available avenues to manage the crises before coming to a decision to approach the IMF. As a lender of the last resort with technical expertise, IMF has the capability of assisting Pakistan overcome the present difficulties, which however wellintentioned, help from friendly countries would not. The PBC hopes that unlike previous programmes, the tax collection and fiscal deficit targets will be set and monitored smartly. The primary KPI of tax collection should be tax revenue from new tax payers in order to broaden the tax base. The fiscal deficit measurement should exclude tax and other payments due by the government. It also hopes that the fundamental flaws undermining local manufacturing are addressed and long term policies are adopted to boost exports and import substitution.

Unlike the previous occasion when Pakistan resorted to the IMF programme, there are a number of positives. The security conditions are a lot better. Pakistan is not suffering from an acute power crisis. The Rupee has already commenced a journey towards a realistic exchange rate. Borrowing costs are being adjusted to dampen demand. The new government enjoys a window of goodwill. Weighed against the positives, the global oil costs are rising and inflation is inevitable. In that Pakistan is impacted as much as any oil importing country. Belt‐tightening will however remain the need of the hour. Thus better that we enter into a well‐structured IMF programme than try to fend for ourselves.