President Disposable Food Packaging Association (DFPA) Ahsan Shahid has said that the new government will have to face challenges in securing consensus to pursue difficult but necessary reforms, including revenue raising measures.
In a statement issued here on Saturday, he said that this observation is unlikely to resonate with domestic political and economic pundits for one simple reason: the Special Investment Facilitation Council staffed by federal and provincial members of the executive and senior most civilian and military personnel has shown ample capacity to deliver on all politically challenging pledges to the International Monetary Fund under the ongoing Strand-By Arrangement – a capacity that may overtly be seen as decisions that have been taken by the caretaker cabinet but without the full support of SIFC members such decisions would not have been possible.
Ahsan Shahid said that Moody’s conclusion that overall uncertainty around Pakistan’s ability to quickly negotiate a new IMF program after the current one expires in April 2024 remains very high has been a mitigating factor in securing an IMF program loan in the past, before SIFC was established in late June 2023.
However, one would have to agree with Moody’s observations that there was “uncertainty around the extent of public protests because they may challenge the legitimacy of the new government. Social tensions may increase which would likely constrain the government’s ability to undertake reforms.”
The President DFPA said that there was no doubt that sustained high rates of inflation, hovering around 30 percent per month during the past year and a half have been fueled by: (i) an inexplicable massive rise in domestic borrowing by the caretakers (not part of the IMF condition) as well as by the 16-month-long Shahbaz Sharif-led government that crowded out private sector borrowing with a consequent negative impact on private sector borrowing and domestic output leading to factory closures and unemployment; and the (ii) administrative measures to meet the IMF-stipulated objective of full-cost recovery and the recent rise in gas prices is a component of that pledge to the IMF.
Simmering public discontent with poverty levels as high as 40 percent was already evident pre-elections, discontent that was not backed by any political party, however in the event that protests become more organized under a political banner then one may be compelled to heed warnings by Moody’s.
