Nod from IMF

Pakistan is to stay put with the IMF. The Staff-Level Agreement reached with the donor has come as a jiff of fresh air for a struggling economy, marred by serious balance of payments issues. The deal, if endorsed by the Fund’s Executive Board, will fetch $1.1 billion, and come to close the current Review Programme. The $3 billion bailout package had seen many crests and troughs in the last three years, including a guarantee that the Fund sought from the disposed PTI, but had survived the thick and thin to keep Pakistan afloat by avoiding a sovereign default. The delicate talks that were held in Islamabad with the new dispensation were in the eye of the storm as the Fund was very particular about reforming sectors of the economy that are reliant on subsidies, and ensuring that a vibrant tax base is forthcoming.

It was soothing to hear that the IMF is pleased with the labour that had been undertaken to get going. But it remains an enigma that the economy is slow, and its fundamentals are bogged down owing to plummeting exports and a currency that is in the stampede zone. That was aptly pointed out by the IMF chief too as he said that growth is expected to be modest and inflation well above target. The consolation, nonetheless, is that the nod from the Washington-based lender will lead to resumption of inflows from other multilateral and bilateral partners.

The tasks before the beleaguered government, groped with problems of credibility, are to broaden the tax base; evolve a working formula to address the electricity and gas tariff adjustments; and avoid circular debt accumulation. The soaring energy prices have not only taken down the industry by making it uncompetitive, but have also axed the purchasing power of commoners. Millions of people have dipped below the poverty line, coupled with socio-economic unrest in the wake of unemployment and a dismal law and order situation. This entails Pakistan to take a dig at a long-term strategy and sever the strings of aid. Seeking new debt for retiring old ones is myopic.

Published in The Express Tribune, March 21^st, 2024.

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