IT has been more than a year since the IMF managing director, Christine Lagarde, came to Pakistan and said that Pakistan faces a “moment of opportunity” as it graduates out of a fund programme.
Reserves were at an all-time high, growth was gaining momentum, and inflation was subdued.
The moment was perfect, she said in every interview, to undertake the right reforms to put the economy on a sustainable footing.
But now, the IMF board has issued a warning.
In a surprisingly worded statement, the board says that the government needs to urgently focus on short-term measures to contain the deterioration in the external and the fiscal accounts.
Quite clearly, that ‘moment of opportunity’ has been squandered, and the country is now back on a glide path towards another IMF programme, and yet another round of macroeconomic ‘stabilisation’ is on the horizon.
As the current account deficit continues to register massive increases, despite a slight depreciation in the exchange rate and two rounds of regulatory duties to discourage ‘nonessential imports’, the trade deficit is eating away at the reserves.
Where it all ends is something that history has taught us with an almost monotonous consistency.
Given that the year ahead is an election year which will see an interim government come and go, with an election in between, followed by the arrival of a new government, it will prove to be an increasingly difficult task to put the growing economic imbalances of the country on the public radar.
This is also the year when the deficits, particularly on the external account, could grow to unmanageable proportions if present trends continue.
In short, this could be, if trends do not correct themselves quickly, the year when the economy needs the most attention and is unable to find it because politics is in the driving seat.
The warnings have been sounding for a few years now, especially since the visit of the IMF MD in October 2016.
That was the month that reserves began their downward trajectory on which they have stayed ever since.
Now, an authority no less than the board of directors at the IMF is warning that matters are urgent and require immediate attention.
Given the politics of the moment, it is unlikely that the attention required will be forthcoming.
Published in Dawn, March 9th, 2018
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