Finance minister Dr Sheikh and the Fund are no strangers, and no doubt he reads their posture better than most, especially in testing times when repayment has begun, bulkier tranches are due shortly, and talk of refinancing has had to be brought up. Yet he continues with his all-is-well smile, which will be met much the same way in editorial columns as it was in the halls of the IMF. Nice try but no cigar.
Maybe its election year compulsions, but Islamabad really shouldn’t sit comfortably in the four-something growth expectation. It’s not nearly enough to warrant any serious thinking on refinancing, especially in light of our “spotty record”, as the Fund duly noted (another hint Dr Sheikh perhaps failed to notice). And with $1.2 billion due by year end, and next year’s number requirement being near four and a half billion, there is simply no way to prevent financial collapse. The government will either come back from the elections to a very different fiscal environment (compounded by a people-friendly budget), or leave the anvil to fall on its successor’s feet.
Another thing the election confounds is the government’s unbelievable resort to borrowing. They must spend more in the run up to the vote. Understandable, but they must make efforts to trigger private offtake in the process. Failing that, unemployment and inflation will murder the middle and lower income groups. Though the Fund has agreed to keep talking, there is little likelihood of refinancing unless a visible shift in policy is incorporated.
Remember the IMF is important not just as a lender. Other bi- and multi-lateral donors invariably take cue from the Fund, always distancing themselves from clients it no longer graces. That is the stuff of Dr Sheikh’s thoughts at least all the way on the flight from Washington. Once in Islamabad, of course, attention must turn to fiscal largesse and the masses, and the general election. There’s the doctor and the Fund, then there’s the doctor and the party.
