Apart from the financing gap that Pakistan currently experiences, there is a communication gap too with the IMF. Even after months of hectic negotiations, both Islamabad and the global lender are not on the same wavelength, and differ in their theories while playing to the gallery. While the finance minister had raised hopes for a deal by saying that a staff level agreement is on the cards, IMF’s mission chief to Pakistan, Nathan Porter, spilt the milk by asserting that the Fund is ‘awaiting necessary financing assurances’ and nothing is done till then, per se. It means Pakistan will have to galvanise cash tranches to the tune of $3 billion from commercial avenues and friendly states before paving the way for a successful completion of the 9th Extended Fund Facility review. This is tantamount to putting the cart before the horse, and is highly untenable for a country that sits on the verge of default.
The crisscross with the IMF, and its inorganic prescriptions, have led to unprecedented toiling for 220 million people of the country. Within a span of the last nine months, inflation has skyrocketed to around 45%, and the rupee has lost its value to the core against the greenback. With widening budget deficit and exports slumping to a record low, there is apparently no way out for the sluggish economy. The IMF itself has identified a hole of $6 billion in Pakistan’s external financing needs, which are unlikely to be overcome if the pace of deterioration continues. Last but not least, commercial banks too are jittery as they are made to read the despicable credit rating which has hit rock-bottom. If academic abstracts are any benchmark, the economy has technically defaulted, and the piecemeal measures to keep it afloat are merely meant for face-saving.
The question remains constant: what’s next? Will the next loan tranche of around $1.1 billion bridge the gap, and get going? The simple assessment is ‘no’. Completing the 9th review programme is one thing, and making inroads for a smooth sailing is another. The puzzle is how to get out of this quagmire, and when!
Published in The Express Tribune, April 17th, 2023.
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