The economy can go to hell

IMF board's lead members are sick and tired of games Pakistan is known to play to avoid serious economic action

Shaukat Tarin, while defending the infamous petrol price reductions forced by his leader in March this year, claimed that he knew how to finance the resulting subsidy without jeopardising the IMF programme. The IMF has “nothing to do with politics. We have told them not to press hard.” Fast forward: Ishaq Dar reduces petrol prices to push the agenda of his supreme leader. “I know how to deal with the IMF and nothing will happen…It is now between me and IMF.” He went on to claim that “Pakistan will not face any negative result as I have some other solutions,” meaning that the gap in the Petroleum Development Levy (PDL) will be bridged elsewhere in the budget. So did Tarin. The two statements are exactly the same.

Nothing ever changes in the Islamic Republic. Yes, the IMF is not a political organisation — at the staff level. This level has made it clear, as it did last time, that the conditions agreed have to be met. Politics happens at the level of the Board. By all accounts, the lead members are sick and tired of games that Pakistan is known to play to avoid serious economic action. It was Dar’s 25 years of experience of dealing with the IMF before the Board when it checkmated Tarin. Dar is living in a fool’s paradise. Like it did during Covid-19 pandemic, the IMF is making assessment of the flood damage and may agree to direct assistance from its concessionary window for disasters and emergencies. But it did not compromise on conditionality then, nor is it likely to do now. The reason is Pakistan’s own track record, reinforced by the deviations by Tarin and now Dar.

I am no fan of the IMF and have been writing things like ‘how to do without the IMF’. All manner of governments found it easier to play with the IMF than without it. All failed to reform, with the result that the structure of the economy is in a shambles. There is now NO alternative to the IMF, unless Dar has found a way to print dollars locally! If he is so confident about finding alternative sources to make up the PDL, he should have the courage to say no to the IMF and reform the tax structure to achieve a tolerable fiscal deficit, if not wipe it out completely. For the external account, he should go for a radical export strategy. But this far-sighted approach cannot build political capital, which in his view has already been seriously eroded by the government headed by Shehbaz Sharif. Miftah was just an instrument. Here lies the catch. Shehbaz knows full well that this is the first and the last time he would be the Prime Minister. In the past, he kept getting offers from the establishment but the loyalty to the big brother stood in the way. That did not stand him in good stead, though. Shahid Khaqan Abbasi was preferred over him after the Aqama disqualification. The circumstances leading to the end of the IK hybrid catapulted Shehbaz Sharif into the high office. General Bajwa’s observation in Washington that “reviving the country’s ailing economy should be the first priority of all segments of society” indicates what the neutrals expected of him. Shehbaz’s own reputation of a doer led him, despite initial dithering due to the displeasure shown by the big brother fed by the samdhi and the niece, to take some tough economic decisions.

How dare he eat into the family’s political capital! The economy can go to hell.

Published in The Express Tribune, October 7^th, 2022.

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