WHETHER one likes it or not, Pakistan signing up for a new IMF programme is almost a certainty. With foreign private or official capital inflows drying up, the State Bank of Pakistan’s foreign exchange reserves have slipped to $6.7bn from $10.8bn in July. The balance of payments situation is about to get precarious on account of IMF repayments stacked up at $3.49bn for the next 12 months. The timing for making a formal request for the new loan largely depends on the realisation or otherwise of the coalition support funds from the US. Unless we receive the CSF, we will need the fund programme before the end of the first quarter of the next year. This means we still have time for the new government to come in and take a decision according to its own economic plans, and the caretakers must refrain from taking such a crucial decision.

Preparations for the fund loan, however, must continue. If the SBP has set the tone for Pakistan’s return to the IMF fold by keeping its key policy rate unchanged despite a significant drop in inflation, the official delegation’s visit to Washington later this week may bridge some of the differences between the borrower and lender over the causes of and solutions to our economic troubles. Such a situation is not new to Pakistan. We have been here many a time in the past. However, the solutions to our worsening external account troubles are going to be tougher this time around. The time for free lunch is over. All energy subsidies will have to be eliminated, cost of credit raised and wide-ranging tax reforms implemented. That will make things tougher for both businesses and the poor, and further slow down growth and investment.