Experts navigate ambivalence over IMF pact, weighing immediate respite against long-term concerns

Immediate relief from default Looms as experts debate long-term efficacy and political ramifications of IMF programme

ISLAMBAD:

Pakistani experts are cautiously embracing the International Monetary Fund (IMF) programme, as the new $3 billion agreement offers immediate relief from the threat of default. However, independent analysts and stakeholders in Pakistan remain sceptical about the programme's potential for large-scale impact and its political implications.

While speaking to The Express Tribune, a representative of the Bank of Punjab, Junaid emphasised the importance of a regulated tax system, calling for every individual to be documented in the economy. This approach, he believes, is essential to combat tax evasion and under-invoicing. “The overall system needs to be fixed,” he added.

Similarly, Dr Abid Hasan, a former advisor to the World Bank, stressed the need to raise taxes and enhance government efficiency. He asserted that without these measures, lasting prosperity would remain elusive. Hasan referred to the IMF loan as “a band aid” that would alleviate foreign exchange crises temporarily, but he acknowledged that it is linked to the country’s struggles due to decades of poor policymaking. He conceded that adhering to the IMF’s conditions was necessary: “Do what has been asked.”

On the opposing side, CEO of Office First, Hasan Gardezi, criticised the idea of increased taxes, deeming it detrimental to an economy dominated by a growing black market. He found the IMF’s programmes highly unsustainable, particularly in light of the high interest rates. Gardezi argued that Pakistan, as a strong country with thriving private enterprises, should focus on cutting expenses and divesting state-owned enterprises to manage its finances. He highlighted the looming $25 billion debt maturation, which would require further loans and bailouts for repayment.

Retired Professor of Economics at Quaid-i-Azam University, Dr Aliya Hashmi Khan, echoed the wariness, saying, “This is not a very comfortable situation at all.” She pointed out the rigid conditionalities, the demand for structural reform, and the potential disruptions in elections. She feared that the pace of change might not align with the IMF’s desired speed, leading to negative consequences for lower and middle-income groups due to interest rate hikes and monetary policy tightening. Like Gardezi, she underscored the urgency of addressing wastage from state-owned enterprises and called for social protection spending to alleviate the plight of the poor. Despite her disillusionment, she recognised the necessity of adhering to the IMF’s plan.

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While a begrudging acceptance appears to prevail, sceptics cast a shadow over the celebratory air of the bailout. As further action is required to address the economic challenges and repay the mounting loans, lasting relief remains distant.

Others staunchly oppose the IMF programmes. Former ambassador to the US, Husain Haqqani, drew attention to the frequency of these loans, stating, “If somebody has to go to the ICU 23 times, then something is wrong with the overall treatment plan.” Similarly, Dr Ashfaque Hasan Khan, Dean and Professor at NUST, voiced his reservations, criticising the inflationary nature of a market-based exchange rate and the state bank’s approach to handling it. He advocated for Pakistan to withdraw from the IMF programme, highlighting the necessity of tailoring policies to individual economies rather than applying a one-size-fits-all approach.

Amid these apprehensions, the programme deal has offered short-term benefits. Pakistan’s sovereign rating improved from CCC- to CCC according to Fitch credit rating agency. Furthermore, deposits of $3 billion from Saudi Arabia and the United Arab Emirates, alongside $5 billion in loans from China, have provided a boost to investments, financing, and stocks.