Another pat on the back
The finance minister had good reason to sport a big smile after the IMF meeting in Dubai. The Fund could not have been more appreciative while rounding up the Extended Fund Facility (EFF). But that would mean that either the IMF has suddenly, dramatically changed its performance-testing criteria or it might have some non-purely economic reasons for the pat on the back. This was the first time, after all, that Dar sb did not have to request a downward revision of practically all important indicators and targets. Also, while the macroeconomic stability cannot really be questioned technically, perhaps the Fund went a little too far about the ‘robust growth’. It could have looked around the region for a better understanding.
Also, it’s not quite clear what the donor meant by ‘challenging external environment’. The outside factor has, in fact, been quite favourable for much of the present cycle. If anything, it bears noting that the Brent collapse, and subsequent low inflation and billions in savings for the exchequer, still only managed 4.5 percent growth; not to mention a fragile deficit. That latter, too, was appreciated beyond merit. And if investment is actually ‘rising’, then why not mention much beyond CPEC?
Another thing the appraisal did not mention was the likely trend ahead. The ruling party has already gone into a premature election campaigning mode. That, by necessity, puts pressure on the kitty; and therefore on the deficit that, though ‘under control’, is by no means pretty. One reason donors like to wrap up programs like the Facility on a cheerful note is to increase chances of another in the near future. Once the election is over and the reserves in the red again, Islamabad will have little option but to return to the IMF. And then everyone can look forward to uplifting appraisals, etc. Meantime the ‘macroeconomic stability’ does nothing for real internal investment, savings, etc, and the ‘consolidation’ remains static.