LEST we forget amid the euphoria over the new $3bn IMF loan, Pakistan, with 23 bailouts, has been the most frequent customer of the lender of last resort for many years.
And we’re likely to maintain this distinction for the next several years even if we start right away fixing our economy’s structural problems, which take us to the brink and the IMF every few years.
The fact that Pakistan has completed only one programme successfully — that too without fully achieving its targets — inspires little confidence in the capability and resolve of our leadership to take us to the ‘finish line’ under the new nine-month facility either.
They have repeatedly demonstrated their impatience with shortcuts to growth for political mileage, breaching the agreements with the lender midway.
That said, the critical importance of the new IMF bailout for the country’s flagging economy can’t be overstated. The IMF board signing off on the loan has already brightened up the economy.
Fears of a sovereign default before the end of 2023 have receded, and Pakistan’s dollar bonds have rallied rapidly since the initial approval of the agreement on June 29.
The rupee has strengthened against the dollar, the stock market is jubilant, Fitch has upgraded Pakistan’s credit rating by a notch, and the Saudis and Emiratis have deposited the promised $2bn and $1bn, respectively, to shore up SBP’s forex reserves.
The government is dubbing these developments as indicators of economic recovery, claiming the ‘hard times’ are over. Well, yes, the hard times may be behind us for the moment. But does this bailout signify the end of our problems? It doesn’t.
It gives us a few stable months to conduct the elections and service external debt over the next six months, but doesn’t really change the fundamentals of the economy such as insufficient tax revenues, low exports, import-based consumption, and so on.
However, it can help us get back on our feet if we use this ‘breather’ as a bridge to broad-based reforms for longer-term debt sustainability and growth. We’re in the deepest ever crisis of our own making and living on borrowed money and time.
We’ve avoided tough decisions for too long, hoping the world would bail us out. No more. There is no way around reforms. No matter how painful they may be, it’d still be worth it in the end.
Published in Dawn, July 14th, 2023
