Notwithstanding Pakistan’s commitment to aggressively implement the new International Monetary Fund (IMF) programme, doubts persist among eminent analysts about whether Finance Minister Muhammad Aurangzeb will be able to fulfil his pledges.

Among other factors, fears are grounded in historical records of missed targets, instability triggered by current political polarisation, and the fact that the country is facing its worst-ever economic crisis.

Addressing the critical issue of getting out of the IMF programme, Mr Aurangzeb says it is “to have a very clear roadmap”.

In their initial discussions held in Washington, Pakistani officials advocated for “a new IMF plan tailored more specifically to their country’s needs.”

Analysts question whether the new IMF programme will break Pakistan’s chain of financial bailouts as strict monetary policies harm industrial output

“We have our own views, and we’ll share it with IMF,” Mr Aurangzeb told journalists, adding that “in terms of the size and duration of the programme, I would rather leave it to the joint meetings”.

Pakistan has requested $6 billion to $8bn — termed as a ‘guesstimate’ by Aurangzeb — for the next Extended Fund Facility bailout package. He, however, stressed the importance of collaborative efforts for sustainable economic development.

On other hand, the IMF’s Middle East and Central Asia director, Jihad Azour, argues, “What is important at this stage is to accelerate the reforms, double down on the structure of reforms in order to provide Pakistan with its full potential of growth.”

Analyst Dr Omar Javed says a more balanced approach is needed to both demand-side and supply-side policies. To quote Belgium-based economist Rizwan Rawji: “If India’s supply-side leadership took the bold and correct steps towards economic prosperity, can’t we in Pakistan?”

“Collaborating for Growth” was the theme of the 7th Leaders in Islamabad Summit held last week where the organisers called for “a shared vision of a successful, sufficient and sustainable Pakistan”. The event was attended by over 1,000 foreign and local delegates.

The government was ramping up support for industries, agriculture, and information technology to boost national growth above four per cent in the coming year.

Analysts pose a pertinent question: Will the new IMF programme break what the finance minister refers to as the “chain of financial struggle and bailouts”? As Pakistan could not complete the IMF programmes in the past for political reasons, they ask, “what is different this time around?”

The IMF has, again, advised Pakistan to keep its monetary policy strict — a policy that businesses argue has already taken a heavy toll on industrial output and the government’s budget.

About half of the current inflation rate — 12pc of the estimate of 23pc for fiscal year 2024 — has been attributed to depreciation of the exchange rate by Dr Moazam Mahmood, Seemab Sajid, and Amna Noor at a conference organised by the Lahore School of Economics.

In an interview with Bloomberg, the finance minister said there would be no reason for the rupee to depreciate more than the range of about 6pc to 8pc witnessed in a normal year.

Highlighting the “solid foreign exchange reserves, a stable currency, rising remittances and steady exports”, he added, “The only thing which can be a wild card, though we should be okay in our projections, is the oil price.”

He expects Pakistan’s foreign exchange reserves to reach “anywhere between $9bn to $10bn by the end of June”.

In its latest move, the customs department plans to widen its oversight of Rs3.03 trillion worth of commodity imports by September to curb misinvoicing and under-invoicing practices.

In discussions with the IMF on the issue of export-led growth, the serious problems of deindustrialisation in Pakistan and rising global protectionism abroad need to feature prominently.

More than 2,500 protectionist industrial policies were introduced worldwide last year — roughly three times the number in 2019 — according to Patricia Cohen of The New York Times. In 2023, most of these policies were imposed by the richest, most advanced economies — many of which previously criticised such acts.

In an article titled ‘Nations turn protectionist in pursuit of autonomy,’ the writer points out that security, resilience, and self-sufficiency were pushed to the front of the list of economic policy goals along with growth and efficiency.

In response to the recent wave of state interventions, the IMF has drawn up a new set of guidelines for when and how industrial policies will be carried out. There are gains, the Fund says, if done right and used to address extraordinary market failures, like the dangers posed by climate change.

It is worth noting here that the IMF has clubbed Pakistan among six nations facing serious conflicts this year and said conflicts and tight monetary policy will affect their economic output.

Once the IMF loan is agreed upon, Pakistan will also request additional financing from the Fund’s Resilience and Sustainability Trust (RST).

The RST is intended to help low-income and vulnerable middle-income countries build resilience to external shocks and ensure sustainable growth, contributing to their longer-term balance of payments stability.

The next budget will reveal how steadfast the government will be in its commitment to undertaking reforms and how Mr Aurangzeb balances stability with fast growth, say an analyst.

Published in Dawn, The Business and Finance Weekly, April 29th, 2024