In a major breakthrough, Pakistan and the International Monetary Fund (IMF) have announced a staff level agreement on $3 billion ‘standby agreement’ (SBA) providing much-needed predictability to economic prospects of the country, which was in the midst of a surging foreign exchange crisis with a bearing on its debt repayment capability. In a statement, the IMF said the new SBA ‘builds on the authorities’ efforts under Pakistan’s 2019 EFF-supported programme which expired end June. This agreement is subject to approval by the IMF’s Executive Board, which is expected to consider this request by mid-July’.
The new deal is being lauded by economic experts and stakeholders, especially the business community, as lack of clarity on the fate of IMF programme was impacting badly the prospects for an improvement in economic conditions of the country and lives of the people Credit for this development surely goes to Prime Minister Shehbaz Sharif who not only held several telephonic conversations with Managing Director of the Fund but also had meetings with her to salvage the seemingly deadlocked process due to differences over certain conditions imposed by the IMF. The PM has expressed confidence that the accord will help strengthen Pakistan’s foreign exchange reserves, enable it to achieve economic stability, and put the country on path of sustainable economic growth. Similar optimism has also been expressed by the lender, which said the new SBA will support Pakistan’s immediate efforts to stabilise the economy from recent external shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners. The IMF also claimed that new agreement will create space for social and development spending through improved domestic revenue mobilisation and careful spending execution to help address needs of the Pakistani people. There is no doubt that the end of uncertainty on the IMF deal would have immediate salutary impact on the exchange rate with hopes that local currency would gain some of its lost strength and improve business confidence in Pakistan.
It is also a fact that the country was doing well without the IMF programme – thanks to hard work of Finance Minister Ishaq Dar and his economic team as they resisted some of the tough and unjust conditions proposed by the Fund and demonstrated their expertise to manage financial and economic affairs during challenging times. In fact, they not only managed the crisis and brought down current account deficit significantly but also lifted the otherwise depressed morale of the people by presenting a budget that offered a ray of hope for economic growth based on internal resources. However, according to economic experts, a deal with the IMF had a symbolic importance as it sends reassuring signals to other bilateral donors and strengthens the confidence of both local and foreign investors. The deal has special relevance to recently announced historic initiative by civil and military leadership to attract foreign investment in different sectors of national economy in a big way. Despite all this, the Prime Minister reflected true aspirations of the people of Pakistan by urging that new pact should prove to be the last loan programme with the IMF. In fact, from the very beginning, the IMF programmes should have been treated as a stop-gap arrangement to support the economy and ensure availability of necessary resources and at the same time, the country should have moved forward on path of self-reliance and growth. Unfortunately, this was not done by successive governments and as a result we have reached a stage where our ability to repay loans becomes doubtful without securing fresh loans from different sources.
The Prime Minister rightly pointed out that nations never develop on loans and there are reasons to believe that conditional loans impinge upon political and economic sovereignty of the country besides compounding woes of the masses. People of Pakistan had a bitter taste of such programmes as these were accompanied with terms that increased inflation to unbearable limits without improvement in overall capacity and capability of the country to repay loans. The unprecedented wave of inflation that is being witnessed by people of Pakistan is mainly because of the IMF conditions and there is no respite in situation as fresh conditions like the requirements to jack up base power tariff by over eight rupee a unit, increase in PDL and free for all imports including the luxury items will make lives of the people miserable. The national leadership should have brainstorming sessions to formulate a workable strategy to reduce dependence on external assistance and exploit instead internal resources to the optimum to run affairs of the state in a dignified manner.
