Package restored, at last

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IN the backdrop of a high sounding drama on home front, Pakistanis finally heard a piece of good news from Washington as the Executive Board of the International Monetary Fund (IMF) finally approved, on Monday, resumption of its stalled programme for Islamabad.

The meeting approved the combined 7th and 8th reviews and release of $1.1 billion tranche under the Extended Fund Facility (EFF) after prolonged negotiations and addition of condition after condition for the purpose.

The Fund augmented the size of the programme and jacked it up to about $6.5 billion, which would provide much-needed breathing space to the country in the ongoing financial and economic crisis that has further been compounded by the devastating floods.

The programme stalled in February 2022 when the PTI government unveiled unfunded fuel and electricity subsidies which the Fund considered as a breach of agreement.

Be it Pakistan or any other country, the IMF bailout packages are not considered as panacea to the economic woes of the recipients because of tough conditions that add to the miseries of the people.

However, resumption of the programme carried much significance for Pakistan in the given situation as packages and aid from other bilateral and multilateral donors is also tied to the satisfaction of the IMF.

The assessment of the Board augurs well for Pakistan as it observed that the authorities had taken important measures to address Pakistan’s worsened fiscal and external positions resulting from accommodative policies in FY22 and spillovers from the war in Ukraine, and which had placed significant pressure on the rupee and foreign exchange reserves.

However, the expectations attached to the programme might create more problems for inflation-ridden and flood affected people of Pakistan as it says immediate priority is to continue the steadfast implementation of the recently approved budget for FY23, adherence to a market-determined exchange rate and pursuit of a proactive and prudent monetary policy.

It is also important to continue to expand social safety to protect the most vulnerable and accelerate structural reforms like improving the performance of state-owned enterprises (SOEs) and governance.

A cursory assessment of these and other conditions that the Government was forced to agree to with the IMF would mean no let-up to the inflationary pressure for the people and inability of the authorities concerned to offer any meaningful relief to the masses.

There is, therefore, no occasion to celebrate the approval of the programme by the IMF Board but one must acknowledge the sincere efforts made by Prime Minister Shehbaz Sharif and his economic team so ably led by Finance Minister Miftah Ismail, which successfully negotiated the agreement with the Fund in the most trying situation.

There were tangible threats of an imminent default, which was delayed by measures like a ban on import of luxury items to lessen pressure on limited foreign exchange reserves and now the threat has been averted with the approval of the programme that would also pave the way for inflows from other countries like China, Saudi Arabia, Qatar and the UAE.

Unfortunately, the fate of the IMF programme hang in balance in the last hours due to the questionable move of the PTI Governments in the KP and Punjab, which threatened non-implementation of the province-related provisions of the accord in a letter that the KP Finance Minister wrote to his federal counterpart.

This was considered as an attempt to thwart the programme and inflict financial and economic harm on the country but PTI maintained it only wanted revision of some targets in view of the situation arising out of rains and floods.

However, leakage of an audio conversation between former Finance Minister Shaukat Tarin and KP Minister Taimur Jhagra and between Tarin and Punjab Finance Minister Mohsin Leghari confirmed that it was, indeed, a deliberate effort on the part of the PTI leadership to derail the programme at the eleventh hour.

The conversation is so clear that no amount of clarification on the part of PTI would satisfy people of Pakistan who were shocked to observe how such tactics can be undertaken by a mainstream party.

Shaukat Tarin had a comparatively good reputation but he spoiled his career by indulging in a conspiracy that he himself acknowledged would harm the interests of the state during his telephonic conversation with Mohsin Leghari.

The latter apparently tried to sensitize the former that the move could jeopardize interests of the country but Tarin, despite being a technocrat, preferred politicking over state interests.

Anyhow, leaving this controversy aside, it is time that a clear- cut strategy is evolved to get rid of repeated IMF programmes by raising and strengthening domestic resources.

 

 

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