Daily Times

It seems talks with the IMF are getting nowhere. The Fund is adamant that the government raise electricity prices, increase taxes and present a mini-budget in order for the second tranche of the bailout program to be released. Yet the government, for its part, just refuses any measures that might increase prices at a time when the people are already pretty upset about rising inflation, which makes a lot of sense given the current political temperature and the fact that the 11-party opposition alliance’s protests are clearly gaining momentum. But while the prime minister’s position is pretty clear, it is not easy to figure out who exactly the special advisor on finance is trying to convince. On the one hand he tells the cabinet that these decisions will have to be accepted since it is essential to get the program back on track, and on the other he pleads with senior IMF executives not to make them binding right away.

Being an IFI man himself, no doubt Hafeez Sheikh understands that there is very little chance of the IMF bending on this one, no matter how justified PM Imran Khan’s concerns might be. It was, after all, decided when the program was signed that these measures would have to be implemented to get the second tranche. That is why it was a bit of a surprise when the program fell apart in February precisely because Islamabad just refused to honour the contract in the wider interest of the people. Yet the cold blooded logic of the market throws a natural question to the noble-intentioned PM. If, in the interest of all those who would surely suffer in the case of yet higher prices, the PM is willing to keep the bailout program in deep freeze for an indefinite period, won’t the middle and lower classes also suffer the most if the aid is not resumed and the economy suffers?

Those familiar with IMF programs are beginning to predict that it is only a matter of time before the government caves in. It just does not have the financial depth to indulge in such adventures with those whose money is keeping the economy afloat right now. That means it would have to drop another price bomb on the people. And that, of course, is going to have political ramifications one of the outcomes of which would surely be a more emboldened and empowered opposition. So the government has a tough choice to make, and the sooner it bites the bullet the better. *