KARACHI: Major political parties have offered divergent views on the impact of $7.6 billion IMF bailout package, and almost all of them were convinced that stabilisation goals could be achieved at the cost of massive employment losses as a direct result of slow economic activities due to expensive credit, reduced government spending and termination of mega projects under the conditionalities attached with the deal.

Former finance minister Sartaj Aziz, who belongs to Pakistan Muslim League (Nawaz), thinks that the PPP-led government had no other option but approach the IMF to fill the forex reserves gap to avoid default on foreign payment obligations, but added that the falling international oil prices had made it somehow easier to convince the Fund that the country would be fiscally better placed in meeting its tough conditionalities.

He said: “Though stabilisation was a hard choice, it was necessary.” However, hike in the interest rate was not supportive of higher economic growth, which is required amid persistent international recessionary trends in the US and European countries, dimming chances of sustaining export volumes to the trading partners in the developed world.

When asked about other options to avoid the IMF loan, he said there were no such options because the Friends of Pakistan and other countries had already shown their reluctance for reasons best known to them.

He was of the view that higher lending rates would offer bleak investment scenario, besides costly loans would hurt industry, and it may result in massive employment losses putting more pressure on the already fragile economy.

The agriculture sector is the only hope and the government should focus on its reformation which can prove an engine of growth. It can put the country back on the rails besides ensuring food security, he elaborated.

Mr Sartaj thinks that the government will not be able to fulfill the condition of bringing down borrowings from the State Bank to zero in the first quarter and may get extension in the deadline, but in June the economic managers would have to meet this to get the next tranche released in the performance review by the IMF.

However, he was of the view that the government would not be able to meet major conditionalities.

“Had the PPP-led government retained its major coalition partners (PML-N) with it, the whole scenario would have been different as flight of capital could have been checked and Pakistan could have avoided the IMF loan, as Saudi Arabia, China and some other friendly countries would have definitely come to our rescue,” he remarked.

He said falling commodity prices, particularly oil prices, on the world markets, would further cut down country’s import bill, giving it more space to adjust development spending, besides easing food inflation.

He said if inflation continues its downward journey, it would create a room for interest rate cut, which will boost investment in productive projects.

Sardar Ahmed of the Muttahida Qaumi Movement feels that the IMF deal was a difficult choice when even time-tested friends, Saudi Arabia and China, had refused.

He observed that the balance of payments was in a bad shape and reserves had fallen to just one month-import level. In this situation, the government had reasonably done the arrangement of deal on its own terms and conditions, thus giving the IMF the role of monitoring.

He said that the bailout package, with the primary objective of stabilisation, highlights the need for cutting back on non-development expenditures, improving tax collection and an end to heavy borrowings from the State Bank, which usually fosters inflationary trends in economy.

He was of the view that stability was a good thing, and the IMF package would definitely help the government achieve it by curtailing non-developmental expenditures and raising new resources for revenue generation, besides undertaking comprehensive feasibility studies before approving any mega or small project to save cost and getting full benefits.

When asked about the impact of two per cent hike in the interest rate, he said although this move would encourage savings, it would make investment very expensive. It would ultimately render local goods uncompetitive amid stiff competition with rivals, like India, China and even Bangladesh.

He, however, said that the SBP should play a role to bring the interest rate down to a comfortable level to ensure availability of financing to industries, particularly export-oriented industries, to fetch more foreign exchange which the country needed the most at the moment.

Answering to another question, the former senior finance minister of Sindh observed that stabilisation measures may worsen employment situation, but the government can’t provide jobs to every one. Anyhow, it can promote self-employment by encouraging micro-financing, in both rural and urban areas on the line of Grameen Bank model.

When asked why International Monetary Fund was so generous that it had opened up its coffers for a country which even could not convince its friends for monetary assistance, he said there might be some political dimensions of this deal as Pakistan was the frontline ally in the ongoing war against terrorism which the world under the lead of United States did not want to lose.

Syed Munawar Hassan, General Secretary of Jamaat-i-Islami, said it was not the first deal with the IMF as successive governments in the past had also engaged themselves with the international donor, but the country had drawn nothing positive as a result of such loan packages.

This time the deal, which the government claims would improve economy, would result in increasing dearness, unemployment and deepening of the economic anarchy, and put pressure on debt-servicing.

He was of the view that thanks to an NRO-sponsored government, it was for the first time in the history of the country that friendly countries, like Saudi Arabia and China, had refused to extend any support which tells “how serious our friends are taking this government.”

He said Shaukat Aziz had proudly informed the nation that the country had got rid of IMF and broken the begging bowl, but the present government had again approached the Fund which already heightened its influence in economic policymaking of the country and was dictating its demands.

He said in the last few months the government had completely failed to steer the economy, and the crisis has worsened as gloomy conditions are knocking at our doors if the government did not pay a heed to the suggestions given by the various economists and political parties to put back the economy on right track and get rid of the IMF and other international donors.

Mushahid Hussain Syed and Humayun Akhtar of Pakistan Muslim League (Q) could not be reached till the filing of this report.

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