Just the breathing space, but where are structural reforms?
The approval of a loan programme worth $6.7bn for Pakistan by the IMF is a mixed bag. As anticipated, the loan was approved by the IMF board of directors to help the country ease out of balance of payment crisis that has already impacted the value of the rupee. However, again as expected, the new programme is not without its set of conditions – some of which had already been implemented by the PML-N government in anticipation in the budget. With its chequered track record, Pakistan faces a tough situation: it can either take the difficult road of structural reform or it can put its head in the sand and pretend all is well, leading it to its economic slide.
For Pakistan this programme provides the breathing space it needed, but how long can it sustain on loans, aids and donations? Pakistan cannot allow its national enterprises to continue bleeding revenue while it expects the IFIs to help it out of trouble every single time. From incompetence to outright corruption, one can find scores of problems that have impeded the growth of the country. What it needs to do is to take tough decisions now to avoid default and humiliation later. It needs to adjust its fiscal and monetary policies in consonance with national needs. The latest loan programme is expected to help the economy rebound, forestall a balance of payments crisis and rebuild reserves, reduce the fiscal deficit and undertake comprehensive structural reforms to boost investment and growth. Islamabad is expected to return over $6bn to its international lenders this year – $3bn to the IMF alone. This made the government go to the IMF in the first place, conveniently forgetting the much trumpeted pledge of breaking the begging bowl. However, seeing as the first tranche of $540mn of the loan will help the country meet its obligations of loan repayments, it is apparent that the country cannot continue with the set of policies it has been persisting with for quite some time. It is time to make structural changes and take some tough decisions. Growth rate may see a jolt to some extent if tight fiscal and monetary policies are implemented, but to counter the loss the government has either to privatise or somehow stop the haemorrhage in the public sector enterprises. As has been reported a total of 71 such organisations have been earmarked for privatisation, which could help boost the economy of the country to a reasonable scale but for that to happen the government has to get approval from the Council of Common Interests, which is a task that should not prove to be too problematic for the present government. What needs to be ensured is transparency in the process so that the public silver could give maximum yield to the exchequer.
Despite suspicions over Pakistan’s ability to implement the promised reforms, the country was successful in getting the loan programme approved, mainly with the blessings of the US in whose interest it is to see Pakistan thrive economically, at least till it withdraws its forces from Afghanistan. It is up to Islamabad now to take bold decisions and make the most out of this programme instead of cementing its reputation as a one-tranche country.