- Latest IMF report not for the faint-hearted
The by now familiar lending agency’s team has landed in Islamabad and begun discussions on the ‘technical’ aspects of the latest bailout package, whose broad contours were outlined during ex-finance minister Asad Umar’s extensive Washington talks in early April with the IMF and World Bank heads. After the nitty-gritty of procuring Pakistan’s embarrassing fiscal statistical data is gotten over by grilling officials of the Finance Ministry, State Bank and Federal Board of Revenue, a government-IMF agreement on fiscal policy is expected by May 10. It might not be ‘10 days that shook the world’, but for the ravaged Pakistan economy, it would provide a temporary reprieve, a financial shot-in-the-arm of around $6-8 billion spread over three years, though inevitably accompanied by attendant adverse side-effects, such as high inflation and interest rates, spelling more misery for the common man. Reportedly, prices of petroleum products are being raised from May 1, a ritual likely to intensify as international oil markets feel the strain of Iranian oil sanctions, possible Straits of Hormuz closure and destabilisation of Persian Gulf region.
A welcome reversal in the country’s all-important current account deficit over the last seven months and other well-intentioned measures undertaken by the PTI government will probably result in a softening of earlier harsh IMF conditions, but the basic ailments afflicting the economy; declining GDP growth, lack of structural reforms, narrow tax base, monstrous debt, high imports and absurdly low exports; will continue to haunt the fiscal landscape, and need years of remedial economic rationality, pinching austerity, visionary (or at least consistent) fiscal policies and the bold political will that wins.
An IMF Regional Outlook Report Update released Monday starkly highlights the ‘sleepless-nights’ nature of dangers confronting Pakistani economic managers over the next two years: $27 billion needed to settle maturing external debt and an overall financing figure of $46—$50 billion; debt-to-GDP ratio reaching 77 percent of GDP, well in the red zone; a further $35 billion commercial loaning required. So, under these desperately straitened circumstances, much-reviled IMF again to the rescue! After all, ‘any port in a storm’. But politicians should also stop treating Pakistan as a private inheritance, and start running it on the laws of economic reason, realism and common sense.
