A fiscal minefield

With a new government hours away any hope of a sunny honeymoon period is fading fast. The Pakistan Tehreek-e-Insaf (PTI) is going to have to hit the ground not just running but sprinting if it has to ward off a monetary dark cloud that is hovering over it. The decisions it makes and implements in the earliest days of power are going to determine both the quality and success of governance. There are significant impediments already in place. For one thing the IMF has yet to endorse the Islamabad nominee for the post of senior adviser to the IMF executive director; and considering the near-future possibility of Pakistan approaching the IMF for a loan this bodes ill. The appointment is crucial but there is a history of murky dealing attached to it. In part there is a competency deficit in those put forward for the job, and in the recent past a nominee made by former finance minister Ishaq Dar was rejected as it was a blatant attempt to boost one of his favourites. The post has remained vacant for 18 months.

Also in the mix is the Fitch ratings agency that notes that the incomers have the political capital to take the tough policy actions but the slender parliamentary majority is going to make policymaking difficult especially if the opposition manages to cobble together an effective coalition. The IMF is going to want to see greater transparency especially in matters pertaining to CPEC, which is reportedly notoriously opaque when it comes to the awarding of contracts. The Chinese are unlikely to be delighted at this development, whilst the Americans will be happy especially if they can prove that Pakistan is using IMF money to pay off Chinese loans.

If the IMF is approached it will be the 13^th such move since 1980, which serves as a pointer for sustained financial mismanagement across successive governments. The PTI has a narrow window to make an intervention that is going to be quickly effective, and the financial dark clouds are deepening high above.

Published in The Express Tribune, August 18^th, 2018.

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