The toughest challenge Pakistan Tehreek-e-Insaf (PTI) currently faces is fixing this country’s broken economy. Over the past seven months, the Pakistani rupee has depreciated against the US dollar by 15 percent. Falling exports and dependency on foreign loans by the previous government has led to real exchange rate appreciation. Lack of financial supervision continues to facilitate money laundering and tax evasion, while being on the Financial Action Taskforce (FATF) grey list has made the country unattractive to foreign investors.
Sadly, it seems that senior PTI leadership has nothing new to offer so far. Reports have emerged that Imran Khan is set to proceed with a $12 billion dollar loan from the International Monetary Fund (IMF) when he takes office. This would be the thirteenth time IMF has bailed out the Pakistani economy, and it is not clear how the incoming government plans to pay this loan back along with the rest of the debt the country has accumulated over the years. It seems debt servicing will continue to consume the lion’s share of this country’s GDP in Naya Pakistan.
Also read: PPP asks MQM-P to choose between federal, Sindh governments
Acquiring this loan may not be as easy as the PTI thinks either, US Secretary of State Mike Pompeo has already raised objections to another IMF bailout for Pakistan, saying that since much of the debt Islamabad has accumulated in the recent past is because of loans from China and CPEC related-imports, there is no rationale for American dollars which are part of IMF funding to be used for this purpose.
This means that the only option the new government may have is to turn to China. Beijing has already agreed to pour in extra-foreign exchange to slow down the Pakistani Rupee’s depreciation. In fact, the rise in the currency’s value since the 2018 general elections has been attributed to this.
To prevent the economy from taking any more damage, the PTI must end the Pakistani economy’s reliance on loans. More borrowing from China, the IMF or any other financial institution must not be considered an option, and quick action must be taken to remove Pakistan from the FATF grey list. The income tax net must also be expanded as this is the only real way to service our debt without putting more economic stress on impoverished Pakistanis. The begging bowl cannot deliver the change the PTI promised its voters. *
Published in Daily Times, August 1st 2018.