If the IMF (International Monetary Fund) has agreed to expand the EFF (Extended Fund Facility) from $6b to $8b, and also add another year to it to help prop up Pakistan’s Balance of Payments (BoP) position, the two sides must have found a way to end the paralysis that has gripped the bailout program. It’s also a good sign that an IMF team is going to come to Pakistan in May to discuss the fate of the controversial subsidies bequeathed by the previous government.
The Fund has already made it very clear that they will have to go, while Finance Minister Miftah Ismail has been talking about doing it in phases, and introducing different retail price slabs depending on consumers’ incomes, so there is suddenly plenty of hope for some middle ground.
While all that remains to be seen, petrol prices will have to go up one way or the other.
That, quite simply, is the stark reality facing the whole nation and even the PTI government reduced and froze prices only because it thought the gambit might give it the winning combination in an existential political chess match.
And the new government is also realizing very fast that it had no magic formula of its own to deal with most of the problems that it attacked the previous administration for. Yet, at the end of the day, paying more at the pump now, rather than foot the bill for an out-of-control current account deficit later, is the lesser evil from the people’s point of view as well.
Pakistan is in desperate need to shore up its reserves. With only a few weeks’ import cover in the state bank’s vaults, the only thing standing between us and possible default not too far down the road is the hope that friendly countries like China will rollover their loans yet again; and again. And that, at best, is a very short term strategy.
So if Miftah Ismail was able to even gently turn the wheel back from a rigid no from the Fund to the possibility of reviving the bailout program in the coming weeks, then he did some good, indeed. *