H H Raza
IMF-Pakistan cooperation has a long history and the organization has helped and benefitted the country during many of its financial crises. In the year 1958 IMF lent Pakistan 0.03 Billion SDR Dollars. The last package which Pakistan borrowed from IMF (International Monetary Fund) is amounted to 4.4 Billion SDR Dollars in 2013 by the government of Nawaz Sharif. IMF before lending money to any country negotiates on the key factor of paying back the loan. There are many countries around the world that have lent money from the IMF to make their economies smoother. Therefore, it is acting as the lifesaving drug for many dying economies.
Pakistani economy historically is dependent upon the agriculture and industrial sectors. Mostly the duties are levied upon the industrial sector which ultimately results in a price hike. IMF programs are usually helping the macroeconomic and microeconomic programs of the country. So, at trying times, IMF helped Pakistan in many ways. In 2013, Pakistan received a loan of USD 6.6 Billion from IMF which was actually disbursed for 36 months. It was the highest debt that Pakistan received ever. But, in spite of getting rid of the financial crisis, Pakistan’s economy again came under pressure because of the financial corruption at government level along with some other factors.
The bad governance of the last government of Pakistan the country had to rely on imports, therefore, it caused widening the current account gap and the reserves fell to a record level. The inflation rate is higher and therefore the economic surveys show that the country is losing the interest of local as well as foreign investors. This was an inherited problem for the new government of Imran Khan. To tackle such an issue initially he visited some friendly countries with whose help Pakistan came out of immediate financial crisis. However, that was not enough, therefore, he (IK) opted to seek IMF assistance to reshape the economy and get rid of the economic crisis. On 12th of May 2019, both sides agreed on Extended Fund Arrangement for 39 months. During this period IMF will sanction loan in different instalments and after every six months an IMF delegation will revisit the Pakistani economy and then decide whether to provide loan to Pakistan or not. Therefore, it is undoubtedly a decisive moment for Pakistan and a chance to once again reshape the economy. These efforts will definitely increase financial space for spending on the human capital and social spending of funds will surly strengthen social protection as well as infrastructure development. The modernization of public finance management will provide transparency.
According to the agreement the State Bank of Pakistan will make all the possible arrangements to reduce inflation which is directly affecting poor segments of Pakistani society. The State Bank of Pakistan will also make arrangements for market-determined exchange rates. This will help liberate the market and let the country stand on her feet. All these are the conditions of the International Monetary Fund for the release of funds. Therefore, the current government has to deal with the situation. Meanwhile, the current situation of the Pakistani economy is not supporting these arrangements. Therefore, it is the test case for the government to deal with the situation and make such arrangements to get loans. The economic/financial experts who have fingers pointed on the pulse of the Pakistani economy say that such arrangements will increase unemployment and price hike. As a result, the number of people living beyond the poverty line will increase. The Sock Exchange of Pakistan is at ten years lowest point. The situation is alarming. The market is not winning the confidence of investors.
We will suggest that the government will have to change its way of governance and should focus on the economy more than press conferences and press releases. At the end of the day, people will only judge you on the basis of your actions and decisions, not on the basis of television interviews. Pakistan economy needs intensive care and the government should control its expenses. There should be clarity and transparency of funds distributed to provinces and other departments of the state. This will be crucial otherwise IMF’s program takes corrective measures towards the economy of Pakistan will not be fruitful. The IK Government has to take difficult decisions to run the state economy otherwise he will be tackled fearlessly by the public and opposition parties altogether and a serious movement against his government is not out of question. He just has a margin of a few months left and failing to deliver he would not have room to manoeuvre. So, IMF’s program is not bad, it’s the policies of the government which make it bad for their people.