THE inclusion of Pakistan’s case on the agenda of the IMF Executive Board meeting later this month must end the uncertainty around the new $7bn bailout for this crisis-hit nation. The IMF will review the country’s loan request on Sept 25 since Islamabad has “obtained necessary financing assurances from its development partners”.
The IMF announcement comes nearly two months after the lender had signed a staff-level agreement with Islamabad. The delay in the ratification of the 37-month programme by the Fund had fuelled speculation that the government was facing difficulties in meeting its stipulations regarding the confirmation of $12bn debt rollovers from China, Saudi Arabia and the UAE, as well as the arrangement of fresh funding of $2bn to cover the external financing hole for the present fiscal.
The recent power subsidy amounting to Rs45bn announced by Punjab was also being seen as the latest bone of contention between the two sides. Deputy Prime Minister Ishaq Dar’s statement accusing the Fund of “deliberately delaying” the release of funds and pinning the blame on geopolitics had led many to believe that the bailout was in jeopardy. However, it is all water under the bridge now.
The IMF announcement, preceded by an aggressive rate cut by the State Bank, cheered up the stock market, with share prices soaring the next morning as the package was hailed as a ‘lifeline’ for an economy reeling from a financial crisis that brought the country to the brink of insolvency last year. Pakistan had narrowly averted default only after the Fund agreed to provide a nine-month short-term facility of $3bn on Prime Minister Shehbaz Sharif’s personal request at the end of his previous term.
The approval of the programme is also crucial for the coalition government, which is struggling to overcome a serious legitimacy crisis, to improve its ratings by reviving the moribund economy. The nod to the loan will help the beleaguered Sharif government kick the default can a little further down the road, but constant borrowing is not the solution to the nation’s deep-seated economic woes and structural issues. Nor does it mean an end to the trials and tribulations of ordinary citizens.
With the government failing to put its fiscal house in order, some reports suggest it is preparing to further tighten the noose around taxpayers and possibly bring in a supplementary or ‘mini’ budget over the next several weeks to meet the Fund programme’s revenue targets.
These reports also suggest that much of the burden of additional revenue measures will be borne by taxpayers, both corporate and individual. That is not how crisis-hit nations like ours break out of the debt trap. If anything, the new IMF loan is surely not going to be our last bailout.
Published in Dawn, September 14th, 2024
