Pakistan's deficit is certainly lower. And why??
Because Pakistan has been consistently taking IMF loans which restricts how much Pakistan can spend each year and to some extent on what. The future tranches of the loans are dependent on Pakistan conforming to spending as per IMF guidelines.. Hence this is a discipline enforced externally and not thru good fiscal policies. And that discipline like any external constraint hurts the poor of your country the most...
To quote from one of your own blogs
IMF's Tough Conditions:
1. Pakistan's central bank must tighten money supply. In order to pave the way for the IMF loan, Pakistan's central bank raised its bank lending rate in early November by 2 percentage points to 15 percent and the state bank has let it be known that a further 1.5 percentage point hike will be implemented in January. The justification for such high interest rates is the high inflation rate in excess of 20% in Pakistan, mainly due to high food and energy prices. Removal of subsidies is making it worse, in spite of declining world oil prices. Tighter money supply will almost certainly hurt businesses, consumers and overall employment, forcing a major recession. According to an Asia Times Online report, Anjum Nisar, the president of the Karachi Chamber of Commerce and Industry, has said, "Pakistan's industrial landscape may soon be marked with dead and sick units and there will be massive unemployment because of the devastating impact on businesses of the higher cost of bank loans arising from the interest rate increase." The liquidity crunch resulting from IMF's tough conditions will turn the already precarious situation of Pakistan's poor daily wage earners into a disaster. Increase in hunger and poverty will hurt Pakistani government's ability to fight Islamist insurgency and maintain peace and stability.
2. Pakistan government must cut spending and raise taxes. The IMF economic stabilization package calls for the government's annual budget deficit to "be reduced from 7.4 percent of GDP in 2007/2008 (July-June) to 4.2 percent in 2008/2009 and 3.3 percent in 2009/2010." The IMF added, "This fiscal adjustment will be achieved primarily by phasing out energy subsidies, better prioritizing development spending, and implementing strong tax policy and administration measures." This condition will also lead to a deep and prolonged recession in Pakistan.
3. The IMF wants Pakistan to raise tax revenue from the present 10 percent of gross domestic product (GDP) to 15 percent by 2013. Neighboring India's total tax revenue, including levies on income, imports and sales, also amounts to less than 10 percent of GDP now. In China, the figure is 20 percent, and among the members of the Organization for Economic Cooperation and Development it averaged 37 percent in 2001. As part of a plan to increase tax revenue, the IMF is pressing Pakistan for the introduction of a tax on agricultural income. Pakistan's large landowners have tenaciously resisted such proposals in the past. Should Islamabad ultimately impose a tax on agricultural income, it will only be after a bitter struggle within the Pakistani feudal ruling class over how to design it to be regressive to make small producers bear a disproportionate share of the tax burden.
4. IMF does not require defense spending cuts, further exacerbating the economic impact on ordinary citizens. The IMF, which is controlled by the US and other western powers, made no demands for cuts to Pakistan's massive military budget. Juan Carlos Di Tata, IMF senior special adviser for the Middle East and Central Asia, expressed concern about the rise in Pakistan's defense spending, but then added that the question of Pakistan's military expenditure had been excluded from the bank's negotiations with the country's Pakistan People's Party-led coalition government. "The issue of defense spending was not discussed during the program negotiations," said Di Tata. "Defense spending is basically an item that was determined by the government and included in the budget projections for this fiscal year. There was no discussion of this topic."
What's Next:
According to the IMF, even after last month's IMF loan, Pakistan will need another $20 billion "to get control over its imbalances." The FOP are scheduled to meet January 13-16 to decide on additional non-IMF assistance to Pakistan. Most likely, they will want IMF to continue supervising Pakistan's economy as a condition for their assistance.
While the US economic revival is planned with multiple stimulus packages, near-zero interest rates and tax cuts to increase liquidity for government, business and consumer spending, it seems the IMF prescription for Pakistan is quite the reverse. It is a basic economic fact that raising taxes does not increase revenue during a slowdown. Rather than close the budget gap, attempts to raise revenue cause a downward economic spiral. Instead of softening the impact on businesses and consumers, the austerity measures will clearly hurt the average and poor Pakistanis disproportionately and cause a great deal of suffering leading to greater political instability in the country. An unstable Pakistan is in no one's interest. But,what is good for the goose is apparently not good for the gander, according to the IMF's perverse logic
Doese this just exist in your dream?
