PAKISTAN and the International Monetary Fund (IMF) have reached an agreement at staff level over ‘reforms’ that will lead to the release of around $500 million in funds, which stood suspended since last year due to Corona-related constraints. Both the IMF and the Government have hailed the development hoping it would augur well for the economy of the country.
The Government was desperate to have the stalled IMF package of 2019 restored that envisaged provision of $6 billion to Pakistan under 39-month Extended Fund Facility (EFF). Under the terms of the agreement, the authorities introduced a number of measures in the realms of taxation and exchange rate in the name of structural reforms and more were to be taken but the progress was disrupted by the outbreak of Coronavirus that strained economies around the world including that of Pakistan.
The avowed objectives of the programme included, among others, to put Pakistan’s economy on the path of sustainable and balanced growth and increase per capita income. It was also claimed that a decisive fiscal consolidation will help reduce public debt and build resilience while social spending will be expanded and the most vulnerable supported. Two year down the drain the country seems to be nowhere close to these cherished objectives as growth still remains subdued, public debt is increasing, social spending is stagnant and the most vulnerable segments of society have been left at the mercy of artificial and real price-hike. Development spending has not increased and the so-called reforms relating to exchange rate have served no other purpose than to increase the burden of debt on the country and inflation for the masses. Despite all this, the restoration of the IMF programme has symbolic value as it would increase global confidence in our economy and might motivate other donors to come forward and do more business with the country.
The development might resolve some of the difficulties and woes of the Government on a temporary basis but the long term interests of the economy demand formulation of a cogent strategy to get rid of IMF and continued reliance on foreign loans to run affairs of the country. This is important as the Government had to increase rates of electricity and gas at a time when people were expecting relief after three years of its rule and more shocks are in store in the coming budget. Such a strategy would be in line with oft-repeated commitments of Prime Minister Imran Khan who expressed his disgust for the increasing debt trap.
