Agreement at last!

One of the most-contested deals has come through. A staff-level agreement with the IMF has come as a sigh of relief, at least, in the context of evading a default, if not sailing through at ease in the long-run. This successful review, which will see Pakistan attain $1.7 billion, conditions Pakistan to gear up for additional measures to address any auto-correction, if desired by the Fund. The neo-deal, nonetheless, has hinted at some prompt institutional changes such as insulating the anti-corruption body from flaws and ensuring that subsidies and state-centric grants are no more on the budgetary estimates. Generating more revenue at the cost of political capital is the silver-lining, and Islamabad has no choice but to oblige.

The extension of the Extended Fund Facility-supported programme till June 2023 is a good omen, and is a success of sorts. Apart from having an additional succor of $1 billion, the total disbursement will touch the tune of $4.2 billion. The point to be noted is that this largesse has not come on the premise of any structural base, but at the cost of fleecing the people. Raising oil and energy prices, slapping new tariffs on electricity and gas, and bringing the subsidies phenomenon to a halt have made the deal possible. Though one is not sure of obstacles that the country will face as it further tightens its belt in an era of plummeting rupee and skyrocketing inflation, what is assured is that the economy is in straits, and there is no respite from donors’ dictation.

Generating more revenue and slashing non-development expenditure is the way to go. Pakistan has a tough roadmap to walk and that entails overcoming its current account deficit of around $22 billion and debt-servicing. The fiscal year 2022-23 must see the coffers pull at least $44 billion to stay afloat, and one of the prime sources of that remain remittances expected at $30 billion. The shortfall can only be overcome by buoying exports, and this is where the dilemma rests. Time to be mindful of targets agreed with the Fund and at the same time keep fingers crossed. The tranche is no less than a bolt from the blue.

Published in The Express Tribune, July 16^th, 2022.

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