Daily Times

The government has held protracted talks with IMF on the ninth review for the release of $ 1.1 billion of the $ 6 billion bailout package, and the portents are that in spite of Pakistan having accepted all the conditions regarding hike in petrol and electricity prices, uncapping rupee parity rate with dollar allowing market forces to determine its real value, imposition of new taxes and a road map for structural reforms, IMF is not going to release the amount until the bilateral assistance by friendly countries is not assured. It is pertinent to point out that the friendly countries and international lending agencies have linked their vitally needed assistance to IMF completing the ninth review.

Minister of state for finance Dr Aisha Pasha, talking to the journalists in Islamabad, revealed that the IMF was undertaking verification from bilateral countries, including Saudi Arabia and UAE, on the external financing needs of Pakistan. She said there were indications that financial assistance was expected from them very soon, which would help staff-level agreements with IMF.

However, it will be naïve to assume that with the revival of IMF assistance, the economy of Pakistan will suddenly embark on the path of sustained economic growth. The economy is in such shambles that the managers of the economy have no quick-fix solution to mitigate the sufferings of the people belonging to the lower strata of society. The agreement with IMF and promised assistance by the friendly countries might help cope with the immediate financial crisis but does not constitute a long-term recipe for the revival of the economy.

The agreement with IMF and promised assistance by the friendly countries might help cope with the immediate financial crisis but does not constitute a long-term recipe for the revival of the economy.

The compliance with IMF conditions has already triggered hydra-headed inflation in the country. There is a possibility that with the full implementation of IMF conditions, the government might have to enhance rates of electricity by 20 per cent, gas by 50 per cent and petrol between 15 and 20 per cent, though in phases.

Nevertheless, rejoining the IMF programme is an inevitable necessity. Realistically speaking the country can no more afford policies based on political expediencies. To be honest, providing gas and electricity to the people below the cost of production might be a good populous ploy but it is not sustainable over a long period without putting strain on the economy.

It is indeed regrettable to note that PTI which signed the deal with IMF committing the implementation of the terms prescribed by it, at the fag-end of its rule wriggled out of its pledge to lay land mines for the PDM government. It was a disgraceful act. Even more shameful is PTI now having a swipe at the PDM government for putting the IMF programme back on track. If the PTI government would be still ruling the roost, it would also have to do the same.

The permeating economic situation is also a sequel to political instability fomented by PTI. Even if Pakistan gets the IMF bail-out, the country cannot move forward without political normalcy and the development of a growth model based on ground realities rather than populous decisions subservient to political expediencies. That warrants concluding a charter of the economy with the consensus of all the stakeholders. But in view of the extreme polarization in the country, it seems a very remote possibility.

Unfortunately, there is no magic wand available to fix economic aberrations within a short period. The people must, therefore, brace for the new hit to their purchasing power.

The prevailing economic situation is a cumulative effect of the failure of successive governments to adopt rational economic policies to put the economy on the path of sustained economic development and the impacts of the global economic environment. They all have relied on loans and grants from bilateral and multilateral sources to keep the economy floating. To date, Pakistan has received $ 185 billion from these sources. Pakistan has also entered bailout packages with IMF 23 times, beginning in the fifties. At present, Pakistan owes $7.8 billion to the IMF. It tells the whole story. These loans and grants were never utilized productively. However, the governments kept duping the people by making false claims about development.

Unfortunately, the global economic environment, which also has a profound impact on the economies of countries like Pakistan, is also not very encouraging. The World Economic Forum (WEF) has predicted in the 18th Edition of its Global Risks Report 2023 that the cost of living will dominate global risks in the next two years, while climate action failure will continue to haunt the planet’s residents for the next decade. The report has highlighted multiple areas where the world is at a critical inflexion point, opining that as the conflict between Russia and Ukraine approaches one year, economies and societies will not easily rebound from continued shocks. The report calls for collective preparation for the next crisis the world may face and in doing so, shape a pathway to a more stable and resilient world. It is pertinent to mention that inflation is presently a global issue. Almost all countries have been hit by it.

The trade war between US and China is already casting its ugly shadow on the economy of the world, and, in case of any likely conflict between the two, the global economy is sure to get a big hit with all its debilitating consequences for the developed as well as developing countries, more so the latter. Reportedly a four-star US Air Force General has warned of a possible conflict with China as early as 2025 over Taiwan and urged his commanders to push their units to achieve maximum operational battle readiness this year.

The global economic growth is projected at 2.9 per cent and the IMF has also downgraded Pakistan’s GDP growth from 3.5 to two per cent. It all boils down to the fact that there are difficult times ahead for Pakistan, and the government in the saddle will have to take some tough decisions irrespective of the political cost. However, while taking these decisions, it should be ensured that the maximum burden is put on segments of society, which are rich and can easily share this responsibility.

The writer is a former diplomat and freelance columnist.