Daily Times

Reports suggest that the World Bank has decided to suspend its programme-specific assistance to Pakistan on account of the prevailing macroeconomic situation. This should be a cause for concern for the authorities as Pakistan already severely lags behind in the Millennium Development Goals, and the WB programmes will be crucial in enabling us to meet the Sustainable Development Goals.

An unsustainable debt burden and unmanaged inflation are among indicators that have led the Bank to take this decision. Important to note is that programme loans are longer-term and their impact on the economy and society is at wider scale compared to that of project loans.

Excessive spending by the federal government has led us to a situation where the current account deficit crossed $12 billion in the outgoing fiscal year. Infrastructure development projects have made headlines and been highlighted by the government as part of its grand development plan, but accountability for the costs of these initiatives has been next to nil. Transport and infrastructure projects have cost the government exponentially, but similar projects have been completed much more economically in other parts of the world.

These costs, paired with increased manufacturing and technical equipment exports for CPEC, are likely reasons why Pakistan is currently in a precarious macroeconomic situation.

To avoid asking for a bailout from the IMF, PM Shahid Khaqan Abbasi has hinted at possible devaluation of the country’s currency, amongst other measures such as reduced imports and boosting exports.

While such drastic measures may yield in some immediate impact, these impulsive and face-saving measures may be disadvantageous in the long run. Lack of effective scheduling of costs has landed the government in the current situation. While falling behind on achieving the MDGs, Pakistan is likely to face repercussions from international agencies if we head towards another bail out.

As elections loom around the corner, the current government needs to ensure macroeconomic stability, while avoiding a new bailout package from the IMF before the end of its term. On principle, the government formed after next year’s election should take a decision on that front. Besides, a new bailout package at this last stage in its five-year term will reflect poorly on the government — after it trumpeted its sound economic policies throughout its term and successfully paid off the last IMF loan in August last year.  *

Published in Daily Times, September 26^th 2017.