THE Executive Board of the International Monetary Fund (IMF) on Monday approved disbursement of the last tranche of $1.1 billion to Pakistan, marking successful completion of the second bailout package in eight years. The Board also backed Pakistan’s plan to get another bailout package to ensure ‘permanency in economic stabilization and deepen structural reforms’. In a statement, the Board referred to the positive impact of the reforms already undertaken and the need for further stabilization measures. It observed that moderate growth has returned; external pressures have eased; and while still elevated, inflation has begun to decline. Given the significant challenges ahead, Pakistan should capitalize on this hard-won stability, persevering — beyond the current arrangement — with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth. Continued external support will also be critical.
It is the second bailout package that the country has completed in the past eight years. Earlier, it successfully implemented the $6 billion Extended Fund Facility from 2013-2016 during the tenure of the PML(N) Government. There is no doubt that the latest programme of the Fund and the accompanying external funding has helped Pakistan restore a semblance of stability and avoid an imminent sovereign default. It is because of this that the Government leaders are celebrating the completion of the programme and are keen to secure another but big bailout package declaring their intentions to move ahead with the process of structural reform initiated during the last two years. New Finance Minister Muhammad Aurangzeb is heading the Government team that has already initiated preliminary dialogue with the IMF for a new package, the contours of which, the Minister said, would emerge by the close of the ongoing financial year. There is no doubt that the IMF assistance has helped Pakistan overcome a grave financial and economic crisis but it is also a time to give a serious thought to the longstanding engagement of the country with the Fund and what impact this engagement had on the overall economic conditions of the country and the plight of the common man. Interestingly, Pakistan has had 23 bailout packages with the IMF since 1958 when it secured the inaugural loan of $25,000. In-between, it got loans of different volumes from the Fund, the largest one of $7.6 billion in 2008 during the tenure of PPP’s Syed Yousuf Raza Gilani. On every occasion, it was proudly announced that the country would not go back to the Fund again but now it seems we have become addicted to IMF aid and cannot live without it. It is a sorry state of affairs that the country has to obtain fresh loans from the IMF to pay back its previous loans. It was in this backdrop that former Prime Minister Shahid Khaqan Abbasi has aptly pointed out that seeking another IMF programme was akin to admitting failures. He is not the only one to feel sorry for the failure of our policies as Prime Minister Shehbaz Sharif has also expressed serious concern over piling up of debt. Speaking at the plenary meeting of the special World Economic Forum (WEF) session on the theme of “Rejuvenating Growth”, Shehbaz identified inflation and the debt trap as critical concerns, describing the latter as a “death trap.” Economists point out that loans are not bad if they are spent on growth and development and they ultimately contribute towards strengthening the capacity of the country to pay back its debt. However, in our case, we are in the habit of securing loans to bridge budgetary deficits, a practice that needs to be shunned. The IMF loans are obtained on the pretext of economic stabilization but we are nowhere close to this cherished objective despite a history of engagement with the Fund spread over several decades. Instead, most of the programmes added to the burden of the ordinary citizen without meaningfully improving the state of the economy. No one would oppose the process of reforms if it is carried out in a judicious manner but so far it badly affected have-nots without making ‘haves’ to share their responsibility towards national growth and economic sovereignty.
