THE visit of Finance Minister Miftah Ismail to Washington for talks with the International Monetary Fund (IMF) proved successful beyond expectations as the Pakistan team led by him not only persuaded the Fund to revive its stalled programme but also extend it by another year.
Addressing a news conference after his crucial talks with IMF, Miftah announced the Fund has agreed to increase the size of its $6 billion loan programme by $2bn and extend it for another year to prop up Pakistan’s balance of payments position and foreign exchange reserves.
He said that Pakistan had asked the IMF to enhance its bailout package from the remaining $3bn to $5bn and an IMF delegation would be visiting Pakistan in May for detailed talks on the proposal.
This is, indeed, a breakthrough and a positive development on the economic front as financial and economic woes of the country are considered to be the major challenge for the new Government in the face of dwindling foreign exchange reserves and yawning fiscal deficit.
The economic team of the Government really deserves credit for moving swiftly to ensure external inflows and the successful talks with the IMF would send a positive message to other donors and help prevent further slowdown of the economic indicators.
Apart from the IMF, there are also indications that immediate negotiations would also be held with Saudi Arabia during the forthcoming visit of Prime Minister Shehbaz Sharif to the Kingdom and later with China.
Subject to finalization of these arrangements, the new Government is expected to feel relaxed as far as external inflows are concerned for the limited period (may be one year or more) it is likely to be in power before the next general election.
PML(N) Government has, once again, confirmed that it has a good economic team and a work plan to address financial and economic challenges of the country and this compares well with the initial performance of PTI government, which wasted many months before approaching the IMF and in the process they faced a multitudes of economic problems.
There is also much clarity on the part of the new Government as it has stated in an unambiguous manner that it would honour all the commitments made by the previous Government, a message that is reassuring for multilateral and bilateral donors.
However, it is also to be seen at what cost the revival and extension of the IMF package would come.
Main issue is withdrawal of fuel and electricity subsidies and according to officials this would be done in a staggered manner so as to not burden the common man abruptly.
This approach is understandable as, otherwise too, the PTI Government had provided the subsidies up to June this year.
Termination of the new amnesty scheme would not be a big issue while another cut in development expenditure is also not likely to affect projects as so far (out of reduced Rs.700 billion) only Rs.450 billion have been utilized.
However, irrespective of whenever and in what manner the subsidies are withdrawn, the move would add to the inflation and the Government should also plan for measures to check it including adoption of a prudent exchange rate policy.