IT’S an important question, and admittedly a delicate one. Can Pakistan’s foreign exchange reserves hold up through the election cycle? In an interview to Dawn, the finance minister says yes, but leaves the door open to any exigency that might arise given the uncertainties that are about to be unleashed with the election cycle. He says “if the situation warrants, one can consider … a new arrangement with the [International Monetary] Fund” but sees it fit to expand no further. It’s an entirely appropriate response, given the enormity of the implications. Nobody should want to stir sentiment in the money markets by speculating or sensationalising news and views regarding the reserves.

But likewise, nobody should seek to create a false sense of security either, because it’s precisely when there is a perceived disconnect between the mood being conveyed by the government and reality as seen by the stakeholders that uncontrollable events tend to break out. A false sense of security is exactly how we created the stock market crisis in 2008, which nearly became a systemic financial crisis. We don’t want a repeat of that episode again, and it’s worth our while to remember that the election cycle of 2007 and 2008 began with “record high reserves” and ended with Pakistan rushing to the IMF for rapid emergency assistance.

The timeline for the election cycle begins with the announcement of the election schedule, and continues to the announcement and arrival of a caretaker set-up, to the conduct of polls, and then the tallying up of the new parliamentary arithmetic and parleys to form a ruling coalition, and then the summoning of the next assemblies and election of the new prime minister and appointment of the full cabinet. By the time this cycle ends, and we have a new cabinet in place, we will be close to or past the end of this fiscal year. The finance minister can reassure us that the economy will be looked after while he occupies the office, but what happens between the arrival of the caretaker and formation of the next cabinet is the real question at hand. That time period is when our reserves situation will be at its most delicate, and the fiscal facts of life will be mute and helpless. It’s worth a thought to consider how things could play out in that intervening period.