The soon to be concluded programme with the IMF, unlike the last one, is being completed without having to be aborted mid-way through. But only a chronic optimist would call this economic stabilisation programme a complete success that saw as many as 16 waivers during its course. Given this, the statement by a senior IMF official that Pakistan is better placed to withstand mild economic shocks than it was in 2013, needs to be analysed fully. More than anything else, it was the savings of as much as $8.5 billion in the annual oil import bill that introduced an element of seeming stability into the national economy. This factor was also responsible for keeping the domestic rate of inflation well within control. Most of the foreign exchange reserves are made up of borrowed money as exports have been showing a declining trend over the last three years. In addition, the overall debt burden is said to have gone up steeply in the last three years.
The energy-related circular debt went up to Rs656 billion. As opposed to the practice of treating circular debt as a budgetary burden until 2013 and calculating the budgetary deficit figure with this burden included in the estimate, from 2014 onwards the Fund has allowed the government to remove this burden from the budget and park it in a holding company so as to enable the recipient to keep the budgetary deficit figure within the limits imposed by the Fund. Another amount of Rs622 billion borrowed from commercial banks for commodity operations is said to have been removed from the budgetary books for the same purpose. Given this, imagine what would happen if at just about this time, the world oil prices were to go up by, say just $10. So, it is not possible to agree fully with the optimism expressed by the senior IMF official. To completely escape the negative consequences of external shocks, Pakistan will eventually need to focus on improving export earnings and reducing tax evasion and avoidance.
Published in The Express Tribune, August 15th, 2016.
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