Pakistan’s Imran Khan govt. struggles with political crisis and IMF negotiations amid mass discontent

The Pakistani government’s discussions with the IMF have hit a roadblock after it reduced fuel prices and announced a tax amnesty. Meanwhile, opposition parties have called for a no-confidence motion

March 15, 2022 by Shriya Singh
Pakistan political crisis
(Photo: Imran Khan via Twitter)

Amid a political crisis, the Imran Khan-led government is locked in delicate negotiations with the International Monetary Fund (IMF) which is reviewing the progress of the USD 6 billion Extended Fund Facility program.

The seventh round of talks between the IMF and the Pakistan Tehreek-e-Insaf (PTI)-led government began on March 4. It is expected to conclude this week but has run into rough weather following the decision by the government to reduce power and fuel prices in the country at a time when they are rising globally. This goes against the IMF’s demand that Pakistan slash electricity and petrol subsidies, eliminate sales tax exemptions, and pass legislation to prevent the government from using the central bank funds to finance social spending.

On February 28, Khan announced that petrol and diesel prices will be brought down by 10 rupees (USD 0.056) a liter and electricity rates will be cut by 5 rupees (USD 0.028) per unit and will not be changed until the next budget session. He also announced a tax amnesty scheme for sections of industry.

The prices of both fuel and electricity in Pakistan have risen multiple times in the post-COVID period under directions from the IMF as part of a reform program signed with Pakistan in 2019 for the USD 6 billion rescue package to “put Pakistan’s economy on the path of sustainable and balanced growth and increase per capita income.” In 2020, the Pakistani government had announced a record increase in fuel prices, days before the end of the fiscal year during which the country’s economy contracted for the first time in 68 years. So far, Pakistan has received USD 3 billion of the 6 billion that is part of the agreement.

A month prior to the the announcements on fuel prices, on January 28, the upper house of the Pakistani parliament passed a law backed by the IMF to give more “autonomy in decision-making” to the central bank, which essentially translates to less involvement of the state – a key feature of neoliberal economies.

Following the prime minister’s announcements on fuel prices, Dawn reported that one of the avenues through which the government plans to finance the relief package is through cuts on development expenditure. The relief package announced by the government comes at a time when discontent is growing over the rising cost of living and a steep inflation rate of 12.96% (February) – the highest in two years.

The Imran Khan government abandoned the IMF program some months ago due to the harsh conditions but was forced to return to it due to the worsening financial situation.

Political crisis

Meanwhile, a political crisis is also brewing which threatens the government. Opposition parties have submitted a request for a no-confidence motion which will be voted on in parliament this month. The nine-party Pakistan Democratic Movement  and the Pakistan Peoples Party (PPP) together submitted this motion. Meanwhile, reports suggest that the military, which is the ultimate power in the country, may be preparing to abandon its protege, Imran Khan. The no-confidence motion is the culmination of rising opposition which led to mass rallies towards the end of 2020. The opposition blames the government for the soaring inflation, among other issues.

Meanwhile, farmers’ movements and trade union organizations have been protesting both the economic crisis and the IMF loan. The rising costs of living and essential commodities like electricity and fuel have directly affected farmers and workers in several sectors.

On February 23, members of the Kisan Board Pakistan, a body representing smallholder farmers in Punjab province, staged a sit-in near Lahore to demand government action on rising inflation. 

The Pakistan Trade Union Defence Campaign  announced on Twitter a massive workers march to the parliament, organized under the banner of All Pakistan Employees, Pensioners & Labour Tehreek, set to take place on March 16.