Tranche secured

There is some succour for an economy in dire straits as the IMF has agreed to release two loan tranches worth $1.2 billion. The decision has come after hectic counselling as Pakistan was struggling to cope with unforeseen spirals in the wake of the war in the Middle East. However, the global lender, while doling out the dollars after having a third review under the EFF and a second under the RSF, has warned of consequences if the government did not adhere to the scripted mandate of pre-war fiscal targets.

Islamabad has been told that it must take necessary auto-correction in terms of the interest rate if inflation exceeds the target range. It would be an uphill task for a dispensation that is wayward in terms of income and expenditure, and has not been able to adopt stringent austerity and introduce reforms. The Fund, contrary to Pakistan's prescription, believes that the ongoing war could cloud the country's economic outlook by impacting growth, inflation and external sector stability.

Islamabad, nonetheless, is hoping for the inflation to rise only marginally by 0.3%, the growth to hover around 4% and the current account deficit to remain restricted within $2 billion despite the global oil price shocks. The donors across the board, however, estimate a growth below 3% as well as currency fluctuation and even lower FDI inflows owing to internal and external conflicts. This is where some astute homework is required, as the IMF has not been too pleased with the government, especially for failing to live up to its promises of doing away with subsidies, cutting down undesired elite expenses and raising revenue from untapped sources.

With the IMF route being there for the last five decades, it's high time for policymakers to think of exiting this constrained format. The way forward is disciplining the economy through reforms and broadening the tax net by slaughtering the holy cows sitting on the fences. The Fund has repeatedly exphasised structural reforms, especially related to state-owned entities, and a transparent privatisation process. Last but not least, drastic anti-corruption measures are indispensable to pull the economy out of the woods.