Stricter conditions

Published March 2, 2023

IT is all a bit confusing. Is it its familiarity with Pakistan’s poor track record or some sinister international ‘plot’ that is keeping the IMF from finalising the staff-level agreement with Islamabad for the revival of the stalled loan, despite the government’s implementation of several politically tough ‘prior actions’?

At a rare background briefing arranged for journalists on the current status of the ongoing talks with the IMF, some finance ministry officials vented their frustration at the delay in the disbursement of the stalled ‘lifeline’ tranche of $1.1bn.

They accused the lender of continuously moving the goalposts even on prior actions already agreed to and executed ever since talks between the two sides began remotely last month.

Calling it “maltreatment”, officials compared the situation to 1998 when Pakistan faced the risk of defaulting in the wake of international sanctions following the nuclear tests. Some went on to blame unnamed countries for pushing Pakistan towards an economic meltdown.

The government can blame the IMF or some unfriendly foreign powers for its economic predicament if it wants. But it cannot deny that it is in hot water today due to its misplaced confidence that it could deviate from the IMF programme and turn to ‘friendly’ countries for its dollar requirements to avoid defaulting.

Nearly three months after Finance Minister Ishaq Dar refused to be dictated to by the IMF, these countries also seem to be siding with the lender, providing Pakistan only enough to keep it going until the bailout loan is finalised. With a large credibility gap and trust deficit exacerbated by the ongoing political drama in the country, it is foolish to expect them to step up to help us in a big way without the IMF on board.

The Fund may be showing further strictness on issues such as the exchange rate, interest rate, external financing gap and the permanent debt-servicing surcharge on electricity, but has the government been keeping its promises?

Can it deny that the exchange rate is again being tinkered with? That said, it must be pointed out that some of the new IMF conditions, such as linking interest rates with headline inflation and the imposition of permanent debt surcharge on electricity, seem quite unreasonable.

The Fund must show some elasticity on these conditions to prevent the country’s economic crisis from getting out of hand.

Published in Dawn, March 2nd, 2023

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