Daily Times

The failure of Pakistan-IMF talks to reach a staff level agreement for completion of the 6th review of the bailout program despite trying twice, first in June and then now, means that the ambitious budget for the ongoing fiscal is already in trouble. And while it’s true that it’s simply too early to draw a curtain on the whole Extended Fund Facility (EFF), it’s also not unrealistic to fear much harsher requirements if the program is to be salvaged. What else would the finance secretary prolong his trip in Washington for if not to find out what more can be done to greenlight the next $1 billion tranche?

Clearly differences over macroeconomic policy and the overall direction of the economy stretch far beyond upfront conditions like increasing power tariffs and petrol prices. That was not the case last year, when the PM’s rejection of these conditions led to the program being suspended. And though the question of why the government agreed to these terms now and not then is best left for another time, it is worth questioning just what was achieved by not playing along when the time was right for it.

Either way, these latest developments put the government in a very awkward position. On the one hand it won’t go beyond a point to accommodate the Fund because it does not want to dilute its expansionary budget, yet on the other it does not have the (fiscal) muscle to implement the budget without the IMF’s money. Still, this disappointment is more a bump on the road than a fatal accident. There’s every reason to expect the program to come back on track. The only problem, from Pakistan’s point of view, is that it would now have to make even more compromises, which will translate into yet more financial trauma for the average Pakistani. Surely this was not the ruling party’s plan when it presented its ambitious budget to please the people ahead of the election.

The IMF program may not be in immediate jeopardy, but there are no easy choices left at all for Pakistan. *