The Extended Fund Facility (EFF) granted to Pakistan was subject to a seventh and eighth assessment by the IMF staff, and those reports, along with the supporting materials, are significant publications since they document and summarise the current situation. The dossier’s contents are largely already known to the general public.
The report, which is ostensibly an authoritative analysis of the health and future of Pakistan’s economy, strangely omits even passing reference to the ongoing monsoon flooding that Pakistan is still dealing with. This is particularly puzzling given that, on August 16, 2022, when the staff report, the main component of the dossier, was finished, the disaster was already taking place in the nation.
However, the report does provide the precise status of Pakistan prior to the disaster, as well as the Fund staff’s assessment and policy discussion. It is explained in clinical detail how the previous administration’s policy blunders put the economy in an unfavorable state; it bears emphasizing that Pakistan’s economy was a slow-motion train wreck when the current administration took office. The study also shows how meticulous and tenacious the current administration has been since assuming power.
In order to improve fiscal discipline by mobilizing revenues and reducing current spending to increase debt sustainability and make room for more infrastructure and social investment; (ii) lower inflation through an appropriate monetary policy,” the report calls for widespread action.
Yet the climate catastrophe that has affected Pakistan is not taken into account. It fails to recognize how the disaster, which at one point submerged a third of the nation, has affected the economy. Additionally, it misses the fact that the lower Indus plain is still experiencing flooding rather than it receding.
What it does include, namely the conflict in Ukraine and the Russian gas embargo on Europe, is crucial as well. With oil prices skyrocketing and LNG nearly out of reach for Islamabad, the spiraling crisis in that theatre continues to send strong inflationary waves in Pakistan’s way. The effects of the Covid-19 worldwide pandemic on Pakistan are also discussed. However, considering that social upheaval is already included in one of the reports.
An additional funding facility of, say, $1 billion spread over two years would have been expected from the Fund to at least be discussed in order to help Pakistan weather this perfect storm, but alas, that was not to be the case.
We can only hope that the Fund will eventually grasp that, as of September 2022, it will be impossible to evaluate Pakistan’s economic situation without taking the flooding tragedy into account, especially given that the root of the issue is climate change and global warming. In the spirit of the Debt Service Suspension Initiative (DSSI), which was established to aid the less developed and heavily indebted countries in surviving the Covid-19 pandemic, Pakistan may be a viable candidate for debt suspension. It goes without saying that the government will