Daily Times

Though the staff-level agreement with IMF for $ 3 billion under a nine month Stand-by Arrangement (SBA) to avert default has been concluded and the Executive Board of the agency has accorded approval for it but as the Prime Minister rightly pointed out that it was not a matter for rejoicing but a moment for serious rethinking as to how to terminate our reliance on loans and put the economy back on rails.

Pakistan had failed to complete the last IMF programme, known as Extended Fund Facility (EFF) as it could only accomplish eight reviews out of 11. The new bail-out package comes with very tough conditions including implementation of the measures announced in the 2023-24 budget, tightening monetary policy, ensuring market-based exchange rate and further progress on structural reforms particularly concerning energy sector viability, state-owned enterprises governance and climate resilience. Negotiating the deal has been a very arduous and tough undertaking for the government including the personal involvement of the Prime Minister who twice met the chief of IMF in Paris. The friendly countries like China, Saudi Arabia and UAE through their support also helped in the conclusion of the agreement.

The agreement may have saved the country from default but it is in no way going to pull down the hydra-headed inflation which has made the lives of the people extremely miserable. To meet the conditions put forth by IMF Pakistan will have to increase prices of electricity and gas besides other agreed measures which will give further fillip to the spiraling prices adding to the miseries of the common man. Unfortunately, there was no other available choice to the government. The bitter pill had to be swallowed to stabilize the economy and pave the way for fixing the aberrations afflicting it.

The country needs a charter of economy enjoying the support of all political parties and stakeholders in the well-being of Pakistan.

Unfortunately, the economy which was already in a nosedive received further hits by the devastating floods that entailed losses to the tune of $30 billion, global inflation triggered by the Ukraine war which badly affected economies of poor countries including Pakistan, defiance of the agreement with IMF by the PTI government at the fag end of its tenure, trade war between US and China as well as the burgeoning political instability fomented by the former Prime Minister. In addition to the political instability he also tried to thwart agreement with IMF and also invited foreign interference in internal affairs of the country. His antics created an environment of uncertainty that scared away foreign investors. All these factors hampered the efforts of the PDM government to resurrect and stabilize the economy.

It is also pertinent to point out that while the government was engaged with IMF for the completion of the ninth review it implemented some of the conditions prescribed by the agency to win its agreement including market-based exchange rate and increase in the electricity and gas tariffs. Although despite the fulfillment of these conditions the review could not be completed it did add to the already spiralling inflation in the country.

There is no denying the fact that 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. 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 also has entered into bail-out packages with IMF 23 times beginning from the fifties. At present Pakistan owes $7.8 billion to 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.

Under the prevailing circumstance, it was inevitable to remain engaged with the IMF. The solution to our economic woes lies in adopting tough and realistic measures including the much-needed structural reforms, creation and enhancement of the taxation avenues for generating internal resources and greater focus on achieving direct foreign investment and reliance on export-led growth.

The task seems quite difficult for Pakistan in view of the fact that the global economic growth is projected at 2.9% and the IMF has also downgraded Pakistan’s GDP growth from 3.5% to 2%. It all boils down to the fact that there are difficult times ahead for Pakistan and the government in saddle will have to make some tough decisions irrespective of the political cost. However, while making these decisions it should be ensured that the maximum burden is put on segments of the society that are rich and can easily share this responsibility.

People also need to understand that their well-being lies in the revival of the economy and laying a strong foundation for sustained economic growth. Achieving that might entail some difficulties for the people along the way but it is in the larger and long-term interest of the country and the economy to make the required sacrifices.

Revival of the economy is going to be a long and difficult phenomenon and it might take at least a decade to fix the economic maladies provided we move in the right direction. The contention by certain quarters that elections are the only way to fix everything is tantamount to duping the people. Elections install representative government but it has to take realistic and pragmatic decisions to deal with the economic issues abandoning populous streaks.

The PDM government has done well to constitute the Special Investment Facilitation Council tasked with attracting big investments from the Gulf and other countries in various fields including agriculture, industry, energy, defence production, IT and minerals for which there exists enormous potential. It is a very prudent and necessity-driven initiative that can give a boost to the economy by creating millions of jobs. In my view, there is also a need for greater focus on export-led growth which helps the country in increasing its forex reserves, and fixing trade imbalances besides giving impetus to growth of export industries and creation of jobs for the ever-increasing labour force.

The country needs a charter of economy enjoying the support of all political parties and stakeholders in the well-being of Pakistan. Whatever government comes into power after the ensuing elections it should give top priority to this undertaking. That is the only way to overcome the economic challenges on a perennial basis. Politics can wait for better times.

The writer is a former diplomat and freelance columnist.