Facing unprecedented challenges, Prime Minister Shahbaz Sharif, helped by the leading coalition partner — Pakistan Peoples’ Party — has formed a broad-based government with an aim to achieve political stability and focus ‘on a joint goal of reversing the drastic economic slide.’

Dr Hafiz Pasha says “we do have a making of a national coalition government who represents 70 per cent of the country.” And to add here, Prime Minister Sharif continues to consult allies to seek their suggestions — as on April 26 — ‘to put the crippling economy back on track.’

Some critics say that it would be difficult for the government to take consensus decisions with the allies holding strong divergent views. The allies, however, appear to have joined the coalition hoping that promises made to them would be honoured.

On the external front, Finance Minister Miftah Ismail had positive and constructive talks with the International Monetary Fund (IMF) in Washington for the resumption of structural reforms and to address the aggravating macroeconomic imbalances. It has initially strengthened the rupee against the dollar.

Though linked with stiff conditions with some inkling of a flexible approach, the IMF is said to have largely agreed to Pakistan’s request to enhance the existing credit facility of $6 billion by $2bn and extend the Fund programme from September this year by another nine months. Quoting sources a news report said the IMF board will take up Pakistan’s case after Islamabad and the Fund staff agree on the budget strategy for 2022-23.

In a statement, IMF Mission Chief for Pakistan Nathan Porter said we had very productive meetings with Mr Ismail over Pakistan’s economic developments and policies under the Extended Fund Facility Programme.

In an opinion piece, analysts however expressed fear that the withdrawal of unsustainable energy subsidies and the return of austere economic policies can unleash a new round of inflation and job losses. Noting that after every economic bust, it is the public that is forced to pay a higher price for economic stabilization, they said, “this cannot go on.”

To quote Dr Pasha, 1pc of the country’s big farmers were holding 22pc of the agriculture land earning Rs800bn annually but were just paying Rs2bn as taxes. Taxing big farm incomes is absolutely necessary but something that the provinces may only consider possibly after the national polls.

The need for the political parties from all the provinces to play their role to together take the country out of the crisis-like situation has been stressed by PML-N leader Nawaz Sharif.

And Minister for Planning and Development Ahsan Iqbal recently even invited his predecessor Asad Umar to a farewell briefing on the development initiatives of greater public importance that PTI started and should continue in the public interest. His ministry has reportedly decided to further trim rupee funded Public Sector Development Programme for the current fiscal year, already reduced by the PTI government from the budgeted Rs900bn to Rs600bn.

On the other hand, Mr Ismail met the World Bank managing director in Washington to discuss the possibility of unlocking about $1.8bn bank loan that was stuck up owing to either for lack of promised actions by the PTI government or because of bureaucratic red tape.

To consolidate his position, the prime minister appears to be trying to expedite or initiate projects which can be completed before the national polls take place. He got the delayed initiation of bus service from Peshawar-Mor route to Islamabad started in just a couple of days.

Presiding over a high-level emergency meeting to overcome the prevailing electricity crisis, Prime Minister Sharif directed the concerned authorities to end load shedding from May 1 by diverting gas supplies from existing industrial consumers. Almost a fifth of the electricity generation capacity is off-line because Islamabad cannot afford to buy coal or natural gas from overseas to fuel its power plants, says a report of Bloomberg wire service.

At the groundbreaking ceremony of the 330km Khuzdar-Kuchlak section of the Chaman- Karachi (N-25) Highway, Mr Sharif directed the concerned authorities to immediately initiate work on the whole project and ensure its completion in one and a half years. In this first visit to Baluchistan, he also announced financial support to about 50,000 people living below the poverty line if they would send their children to school.

According to a PPP statement issued after the Nawaz-Bilawal meeting in London, the joint goals will focus on reversing the drastic economic slide, as well as healing the deep scars from the assaults made on the country’s democratic system. The immediate goals include repairing the rot across the board.

At a round table meeting titled ‘Immediate Economic Priorities for Pakistan’ organised by the Sustainable Development Policy Institute on April 22, speakers were of the unanimous view that the country was facing the worst financial crisis and needed to introduce and implement tough economic measures to deal with the economic situation.

Reviewing the latest trends in imports and current account deficits at the SDPI event, Dr Pasha concluded that there was no further space in the monetary policy to curb imports as the maximum had already been made. The only option left, he added, was to bring about changes in the basic structure of the non-health, non-education and non-food duties to reduce imports.

An IMF report says the high debt burden could hold back economic growth of emerging market economies by an estimated reduction of well over 1.3pc pc of the GDP over the next three years.

In Pakistan, about 90pc of new gross foreign loans in the first nine months of the current fiscal year were secured to bridge the budget deficits and support foreign exchange reserves, according to the Foreign Debt Bulletin for July-March 2022 issued by the Ministry of Economic affairs.

The problem of domestic debt has become a serious choke on the government’s capacity to spend, said former State Bank Governor Syed Salim Raza addressing the Pakistan Institute of Development Economics seminar in Karachi. He further observed that growing debt repayments result in a higher fiscal deficit and clogs up the balance sheets of banks. About 80pc of government borrowings through banks is an astronomical figure compared to other emerging markets. More than 45pc would be very rare elsewhere.

Published in Dawn, The Business and Finance Weekly, May 2nd, 2022