Seeing sense

Published January 21, 2023

IN deciding to step back from its rigid position on the IMF’s bailout conditions, and leaning towards an early resumption of the stalled loan programme, the ruling coalition has made a sensible choice.

Reports suggest that the government has finally invited the lender of last resort to sit at the table to sort out all outstanding issues that have impeded the finalisation of the Fund’s ninth review for almost four months and delayed the disbursement of the next loan tranche.

Anonymous officials say the government has completed its workings on all contentious areas on the basis of its informal interactions at the recent Geneva conference after weeklong deliberations, with input from the PM.

However, it remains unclear if the rulers are ready to go the whole nine yards to close the deal that is crucial to stabilising Pakistan’s weakening external sector. Indeed, the acceptance of IMF conditions will bruise the egos of some top finance managers of the government who particularly oppose the free float of the rupee.

However, this is hardly a cogent reason to delay action on the IMF’s demands. It’s also not clear if the IMF will agree to send its team by the end of next week as requested by the finance secretary or if it will wait for Islamabad to first execute the actions needed to meet its conditions.

There is no denying that implementation of the loan conditions — a market-based exchange rate, increase in electricity and gas rates, additional taxes to make up for revenue slippages in order to contain the budget deficit within the original programme targets, removal of import curbs, etc — will further eat into the ruling PML-N’s political capital ahead of provincial assembly polls in Punjab and KP, as well as the approaching general elections.

Nevertheless, the government has no other options left to avert a sovereign default over the next six to 12 months.

The Saudi finance minister’s statement at the World Economic Forum that future support from the kingdom to its allies would be aligned with multilateral agencies, and would also depend on the countries’ willingness to revamp their economy indicates that the investment and other financial support plans announced recently by ‘friendly’ countries for Pakistan are not likely to materialise without the IMF on board.

Prime Minister Shehbaz Sharif’s desire to ‘sweeten the bitter pill’ of IMF conditions and put minimal economic burden on the inflation-stricken people is understandable: the choice he faces is politically tough, to say the least. But he has no way around it.

Further delay in repairing the relationship with the IMF will only exacerbate the political price his party will have to pay as well as increase the already hefty economic costs being borne by the people and state.

Published in Dawn, January 21st, 2023

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