EFF to RSF

Pakistan’s economic health is on the downslide. It is desperate for a cash injection from the IMF, and is reportedly aspiring for a $8 billion loan. This new facility, if approved by invoking the maximum SDR limits, would land it in the Resilient and Sustainability Fund (RSF), after witnessing a stampede at the hands of a similar but lesser intensive Extended Fund Facility (EEF) for the last many years. Though not a solution in itself for the economy in rough waters, it will at least help it sail through the budget and keep its promise as far as honouring sovereign commitments that are maturing to the tune of $5 billion in the upcoming fiscal year.

Pakistan is already laden with friendly cash deposits from the UAE, China and Saudi Arabia to the tune of $12 billion, and has been at odds in seeking fresh avenues of liquidation. High-level visits to Beijing for resetting the all-weather friendship, and to Washington to convince the biggest lender are cases in point. With no single creditor in a position to dole it out, Islamabad is busy surfing the RSF prospects and faces an uphill task of meeting conditionalities that would be suicidal in terms of political capital.

Some of the terms indicated by the IMF include slapping even more taxes on the salaried class and pensioners, further increase in electricity and gas prices, renegotiating the NFC Award, and all this with the prior approval of the parliament. It means additional revenues measures equal to 1.6% of the GDP or Rs2 trillion have to be raised for being eligible for the new loan programme.

At a glance, it seems to be a recipe for disaster. Mismanagement of the economy on an ad hoc basis and surplus of imports, along with an unending pilferage and elite capture, have brought the country on its knees. With pressure to raise interest rate and depreciate the rupee against the dollar, the equation does not come to serve the ambition of attracting foreign investment. As it is, debt and liabilities leave little room for development and running the affairs of the state.

Published in The Express Tribune, June 9^th, 2024.

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