ARE we getting an IMF bailout or are we not? The debate is centre stage again in the wake of Prime Minister Imran Khan’s weekend meeting with IMF director Christine Lagarde. I wish it were not. No, not because the matter of the bailout is trivial. It isn’t. But every time we consume the nation with this issue, it misguides people by presenting it as some kind of silver bullet and allows the policy machinery to mask what they really need to be focused on: internal reform.
Let me predict. We are going to go to the IMF and we are going to get a package. Not an ideal one; but an okay one. Three reasons.
First, I am told that traditional naysayer-in-chief Imran Khan has been convinced otherwise. It is no secret that he had boxed himself in on the IMF issue. Even as his technical advisers were rightly telling him we must go soon, he knew he had for long singled out the IMF as the villain he would not indulge. Very recently, though, he has signalled that he’s ready — ironically, now defying a relatively more sceptical (about the IMF) Finance Minister Asad Umar.
Take a look: No panic over IMF bailout package, says Asad
Second, the government feels it has finally got the international environment to turn in its favour. And in as much as they see the IMF as a political beast taking cues from Washington, the decision makers are probably buoyed by how the Pakistan-US relationship is looking.
IMF money means nothing if we don’t get real.
Better noises have been coming out of Washington since the Afghan peace process began to take shape. The clearest statement yet — and this has created some excitement within the policy enclave — came from Zalmay Khalilzad, US special envoy for the Afghan peace process, last Friday. Offering his first public exposé on the Afghan negotiations, he was uncharacteristically candid about Pakistan’s support and of the US desire to mend ties with Pakistan at the back end of an Afghan peace deal. Add to this that the US has stood back and allowed the Saudis, Emiratis and Qataris to support and bail Pakistan out in the past few months.
To be sure, I can make a fairly compelling case that we exaggerate how politicised the IMF is and understate how negative Washington’s intelligentsia remains on Pakistan. But what matters is the sense in the corridors of power. And there, the view is that the tide is turning and this will affect the IMF’s attitude.
Third, the ping-pong match between the Pakistan government and the IMF has forced both sides to self-correct and bring the technical aspects of a deal to an acceptable equilibrium. The IMF has played hardball to date, asking for the moon in terms of conditionalities. Pakistan’s muscle memory on IMF negotiations has always driven it to ask for an opiate without transforming its domestic economic behaviour — and it has almost always succeeded. Both sides are by now fairly clear that the deal is going to be somewhere in the middle this time. As far as I can tell, they know what the ‘middle’ is.
Good news? Yes. We need the package, not only because of the direct infusion of cash it will bring, but also because this will open up other borrowing opportunities from the open market. And yet, all this means nothing if we don’t get real about what we’ve got to do ourselves.
My worry is that if we keep the current tenor of public debate going, we won’t. As soon as we secure this deal, we are likely going to see the prime minister declare victory like he did after securing money from the UAE and Saudi Arabia. Lost here will be the fact that this money has taken us off the ventilator, nothing more. We are still sick and shall remain so if we don’t overhaul the structures of the economy.
The bottom line is as simple as it gets: we spend way more than we earn and there is nothing short of real and intense structural transformation of the economy that can bridge this gap sustainably. Previously, we behaved like an addict who continues to get an opiate under the promise that he’ll enter serious rehab. In reality, we have neither shown the intent nor seem to have had the capacity to bear the pain the process entails.
This is the only question we should be debating: are we ready for serious rehab, and if so, is everyone clear what all this will entail? If we are, we should be taking the discussion in a different direction: if there were no IMF, no bilateral benefactors, and no remittances, what would we have to do to bridge the revenue-expense gap? That’s the approach we need. If we adopt it, the rest is not rocket science and will follow. But for this, the prime minister would have to move the public narrative away from declaring victory to warning the public that what’s coming is going to hurt, but that it’s a pain we must endure for our long-term success.
None of the previous governments have had the courage to do so. Will Mr Khan?
The writer is the author of Brokering Peace in Nuclear Environments: US Crisis Management in South Asia.
Published in Dawn, February 12th, 2019