Signs of hope?

The news of pledges of around $10 billion from Geneva comes at a time when the economy of Pakistan had been written off by pundits of all hues — global as well as local. These are pledges, or statements of intent, that will take some time to convert into firm commitments in the form of written agreements. Actual disbursement is another story. It is directly proportional to the recipient’s capacity for timely utilisation — something that has witnessed continuous erosion overtime. That said, the signs of hope are there. First, Pakistan had a plan to sell. She wasn’t begging for help, but asking for compensation for the damage done to climate. Secondly, the country prepared well, technically and on diplomatic front. Pakistan spearheaded the process leading to the placement of the Loss and Damage financing facility on the COP26 agenda. It was followed by Bilawal’s diplomatic offensive in states that matter. Lastly, the Resilient Pakistan document committed to pay half of the $16.3 billion bill domestically. All this improved the credibility of a country at the risk of default to the extent of receiving pledges well beyond its expectations. The resulting exuberance is not irrational.

What is irrational is the “abnormal” posturing of the finance minister vis-à-vis the IMF programme. Before leaving for Geneva, there was the “who called whom” fiasco. The hope that the IMF boss will personally participate did not materialise. Only the mission head showed up. While we know the statements made by all heads of delegations, any statement by the IMF at the conference is conspicuous by its absence. In the past, the IMF has provided direct assistance to Pakistan in the case of disasters. The list of pledges made in Geneva makes no mention of the IMF. A meeting did take place on the sidelines with the finance and economic affairs ministers. No formal statement was issued, as no headway was made. The IMF repeated the unfulfilled conditions for the ninth review and the Pakistan side pleaded for a breathing space. At the presser on return to Pakistan, the finance minister once again hinted at accountancy tricks to make up for the revenue gap. A similar attempt by his PTI predecessor had been pooh-poohed by the IMF. His adamance on power tariff continues. And the news that the SBP’s Deputy Governor, Murtaza Hussain, will not get another tenure, reconfirms finance minister’s love for dirty-floating of exchange rate.

The finance minister seems to be hoping that an immediate lifeline from the Gulf will shore up the State Bank’s reserves from the dangerously low level of $4.5 billion. He is, however, hoping against hope. The offers from the Gulf are still under study, meaning that the study will be completed once the IMF programme is in place. The same is true for the multilateral pledges in Geneva, a good $7.7 billion out of a total of $9.7 billion. Assuming it is disbursed quickly, the balance amount of $2 billion can only add 2-3 weeks’ liquidity. With inflation at 25.5% and essential prices index as high as 32.9% even for the group spending Rs29,518 to 44,175, the refrain that the people cannot be burdened any further is understandable. But the alternative to dilly-dallying on the IMF programme is even higher inflation on top of a foreign exchange crisis of unmanageable magnitude. Between the hopes kindled by the vote of no confidence in National Assembly and the possible uncertainty following the vote of confidence in the Punjab Assembly stands the global confidence in economy expressed in Geneva waiting to be anchored in the IMF.

Published in The Express Tribune, January 13^th, 2023.

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