By Sardar Khan Niazi
Our dear homeland has already faced acute economic challenges, low foreign reserves, unprincipled governance, an energy crisis and climate-induced floods, and high inflation. Unfortunately, the current political chaos has worsened circumstances for the masses.
The severe economic issues and price hikes have pushed the middle and lower middle classes below the poverty line, while low government spending in the social sectors has sharply deteriorated the life quality of the people.
Bloomberg has rightly stated in a note that political ambiguity in Pakistan is perhaps one of the causes the International Monetary Fund (IMF) is hesitant in reviving the stalled bailout package.
Money is fleeing Pakistan because there is a growing risk that the IMF will not deliver the bailout needed for the country to avoid default in the fiscal year starting in July.
The rupee plunged to a record low of 299 per dollar after Imran Khan’s arrest last week but has since clawed back some gains and settled back at 285 after his release. The worsening economic situation has also kept the currency market under pressure for months. The currency will likely fall further if PTI and the government continue to clash and if the IMF chooses not to provide loans. The country’s economy continues to bear the burden of mounting debt and falling foreign exchange reserves. Talks of default are gathering steam again and Finance Minister Ishaq Dar is trying to appease markets.
The authorities’ failure to talk straight to the IMF and secure a desperately needed bailout package has made Pakistan’s crisis significantly worse. It would have been a very different picture had corrective measures to revive the economy been taken in time.
Pakistan has only managed to survive so far by massively curtailing imports, thereby choking a vast segment of the economy and significantly throttling growth.
A formal default could unleash further catastrophe. Therefore, while the effort to get political parties back to the table was commendable, however, it could not yield fruits as none of them realized that what they were fighting over could quickly prove to be a poisoned prize in case of failure.
Have the current players enough expertise to improve a damaged economy, or can they afford the political cost of doing so? The government and PTI leaderships have diverted too much of their faculties to fighting each other, letting the economy further fall down. It is high time they realize the situation and mend it.
Sometime back Minister for Finance and Revenue Ishaq Dar while commenting on the delay in the conclusion of a staff-level agreement with the IMF for the release of a crucial economic bailout package said that Pakistan would not default, even if a stalled loan program with the International Monetary Fund (IMF) was not revived.
Pakistan started formal talks with the Washington-based global lender in February this year to negotiate a plan to rescue the country’s economy by reviving the IMF’s Extended Facility Fund (IFF) and securing the release of a $ 1.2 billion tranche that will be part of the Country’s $ 6 billion bailout package previously concluded in 2019.
The IMF was extremely annoyed with Pakistani authorities who blatantly trashed the EFF program twice through their politically motivated economic policies and fiscal governance during 2021 and 2022 by the successive administrations of warring Pakistan Tahreek-e-Insaaf (PTI) and PML-N respectively. In the prevailing situation, the experts are of the view that the IMF’s endorsement of Pakistan’s economic policies and revival of EFF program is crucial for the restoration of global confidence in the country and the revival of economic and industrial activities as the nose-downed economy needs periodic injections of additional resources to achieve sustainability.
