- Fiscal discipline aborted after last bailout programme
Like the PPP regime preceding it, the PML-N government completed its five year term recently despite stutters and hiccups, euphemistically speaking, the events being regarded as miraculous and much trumpeted achievements, but each set of rulers left the economy in far worse shape than they found, or as some would fondly like to believe, inherited for evermore. Since 1988, Pakistan’s economic wizards have trodden the familiar path to IMF’s Washington headquarters eleven times, the last being the three years multi-tranche bailout Extended Fund Facility for $6.64 billion in September 2013. Despite strict IMF monitoring and surprising acceptance of Pakistan’s seemingly cosmetic meeting of relative conditions, resulting in successful completion of the programme, the little fiscal discipline and restraint displayed under IMF’s watchful eyes were quickly forgotten, the lessons of structural reforms and macroeconomic stability callously discarded. By brazenly fudged figures and fine-spun media hype, governments created a picturesque illusion of prosperity and perfect bliss.
Enter the caretakers, 2018 edition. Despite largely belonging to the elite, they can speak their minds frankly in public, owing to their limited constitutional shelf-life of just two months. As in the case of the 2013 elections’ setup, the current caretaker finance minister has voiced opening of negotiations with IMF to reach a tentative agreement on basic requirements and attached conditions, and so ease the burden for the incoming government when it wears its dubious crown of economic, political and security thorns. No doubt the arrangement will be much more stringent this time around, because the country’s finances are entering the anarchic, bankruptcy zone at high speed, with the chronic problems, lowered GDP growth, precarious forex reserves, record current account deficit, massive import bill, low volume of exports despite three currency depreciations, surging foreign and public debt, ever increasing tax-to-GDP ratio, rising interest rates and inflation, spectre of debt-servicing, narrow tax base, white elephant public sector enterprises, all the intrinsic frailties, are now careening out of control. The downtrodden, vulnerable groups receive scant development funds for their uplift, with more of God’s humblest falling into the wretched poverty trap, and these unpalatable and dangerous economic realities truly demand the undivided attention of the next government.
