Daily Times

It’s become an unending puzzle. The International Monetary Fund (IMF) has very clearly said that it would not release the third tranche of the Extended Fund Facility (EFF), our flagship bailout program, till the government of Pakistan agrees to raise the electricity tariff as well as taxes through a mini-budget. The prime minister has also been very clear, every time the matter is brought to him, that he will not agree to such measures while the economic situation is so fragile and prices are so high. Nothing right now would hurt the common man and work to the opposition’s advantage like higher taxes and more expensive electricity on top of all the other problems in these hard times. Rapidly rising number of new coronavirus cases as well as deaths only make the government’s job more difficult, of course.

Yet if you ask the PM’s special advisor on finance, the only thing one gets to hear is that the program is all but back on track. And now that an IMF team is visiting Pakistan once again to talk about the fate of the stalled program and how to revive it, he has been spreading his usual optimism once again even though nothing has changed since the many times he was proved wrong. Maybe Hafeez Sheikh knows what nobody else in the country does, especially since the details of the talks so far have been kept from the public, or he’s trying to keep the market from panicking but it seems that the government would have to agree to some serious concessions to get the Fund to play ball this time.

There’s not just the threat of the program never restarting again, but also what could be lost in case it is brought back on track too late. There’s no telling how much and how urgently we are going to need external funding should the coronavirus situation deteriorate and another lockdown be needed. There’s just not enough fiscal space available to the finance ministry to work out another stimulus package while the state bank is already out of ammunition after practically bending over backwards to keep markets solvent during the first wave of the pandemic. The best that can be hoped for is the IMF to show some flexibility and delay implementation of some of the harsher conditions of the program. But the bigger question is what are we going to do in case of a refusal? Would we still be able to salvage the bailout program?  *