IMF and Pakistan
The nation was assured way back that the present programme with the IMF will be the last. To this day, Pakistan has had 23 restructuring plans with the IMF and, of late, the staff-level agreement on a nine-month bailout package was to the tune of $3 billion. But it seems the country’s obsession with the Fund will stay on for years to come, and one of the prime reasons behind the indispensability is its inability to sustain on its own revenue resources. Caretaker Finance Minister Dr Shamshad Akhtar has hinted that more loan programmes will be needed with the international lender as the economy remains fragile. With this pronouncement, Pakistan also postponed the launch of new bonds citing high interest and costly market conditions as major impediments.
This new decision deserves some critical introspection. The question is: when will we be able to sustain on our own, and what measures are lacking to make that happen? The problem is with our budgeting structure which is lopsided and there is a misbalance in distribution of revenue between the federation and the provinces. The Centre is left with almost no funds and the provinces end up with surplus in their respective pools. Similarly, 22% of interest rate is unexplainable, and will not lead to any growth in real sense. The point that the country accumulates around $20 billion per annum current account deficit is a trauma. With exports trailing at $27 billion and remittances taking a plunge owing to political instability, the overstress on raising taxes is not working to its desired results.
The economy can only bounce back if local entrepreneurship and production is export-orientated and the country fetches at least $100 billion in exports. Regular tariff adjustments, substantial hike in gas prices and adherence to the market-determined exchange rate are salient features of the deal. Last but not least, disinvesting some of the state-owned units is unavoidable to stay afloat. Will that too be done to lift the economy in all sincerity is anybody’s guess.
Published in The Express Tribune, November 18th, 2023.
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