- A lack of political consensus and the FATF
Pakistan has received the first immediate tranche of the latest IMF Extended Fund Facility (EFF) of $1 billion out of a total of $6 billion, giving the SBP reserves a much-needed boost to reach $8 billion after almost reaching a dangerously low level of below $7 billion, last seen in 2013. Future tranches will however come in after periodic review and in much lower volumes over the next three years. Those review meetings will mostly be an assessment by the Fund of whether or not Pakistan is fulfilling the financial conditions of the EFF so that they remain on track as the programme progresses. That the IMF resident representative Teresa Sanchez feels that the programme faces ‘significant risk from a failure to build political consensus around its key components’ means that there are political conditionalities attached to this bailout as well. Her concern is valid considering that the PTI does not have a majority in the Upper House and a very thin majority in the Lower. There are certain requirements in the latest EFF like amendments to the State Bank Act, NEPRA Act, Anti-Money Laundering Act and the State-Owned Enterprise Act, that will require legislation and therefore the opposition’s vote.
Clearly, the Fund too is observing how relations between the government and opposition are deteriorating by the day with no let-up by either side. While the government continues to lock up the top tier leadership of major opposition parties on unproven innovative charges, the opposition too is not taking it lying down as it dials up the temperature both in and outside of Parliament. Ms Sanchez also pointed out that remaining in the FATF grey list will make it difficult to secure much-needed private capital inflows in this fiscal year; however the listing did not affect disbursements of multilateral loans. It is still however essential to meet satisfactorily the FATF terms to avoid blacklisting and get off the grey list for long-term financial stability. The government must realise that if it wants to take full advantage of the IMF programme it will need to create some consensus with the opposition but if it continues push them up against the wall they will be unable to meet some key conditions set forth by the Fund.