THE authorities concerned are reportedly examining avenues to increase the size of upcoming IMF bailout package with one potential strategy involving the incorporation of Climate Finance alongside the Extended Fund Facility (EFF). Should this proposal materialize, it could allow for the expansion of the program size from $6 billion under the EFF to $7.5 or $8 billion, taking into consideration Pakistan’s specific quota available under Special Drawing Rights.
Our economic landscape is fraught with complexities, characterized by burgeoning external liabilities and a precarious repayment timeline. The staggering outstanding payables, expected to exceed USD 25 billion in the next year, underscore the pressing need for financial interventions. Compounded by the imminent expiry of the existing IMF program, failure to renew would plunge the nation back into the abyss of uncertainty, eroding investor confidence and stunting macroeconomic growth. In this challenging milieu, leveraging IMF instruments such as the Resilience and Sustainability Facility (RSF) presents a viable avenue for bolstering economic resilience and sustainability. The RSF offers affordable long-term financing tailored to countries undertaking reforms to mitigate risks associated with climate change and pandemic preparedness. However, securing IMF loan entails stringent conditions, necessitating decisive policy measures from the government. While acknowledging the inevitability of certain austerity measures, it is imperative to shield vulnerable segments of society from the adverse effects of rising utility prices. Moreover, prioritizing productivity enhancement in key sectors such as industries and agriculture is paramount to attract investment and revitalize economic growth. Simultaneously, expediting the privatization of loss-making enterprises is indispensable to alleviate the burden on the national exchequer and foster fiscal sustainability. Amidst the urgency of the situation, political expediency must not impede the imperative for IMF program. The renewal of the IMF program should transcend partisan interests. Any delay or uncertainty in securing the program risks undoing the hard-won gains and perpetuating the cycle of economic instability. According to a recent report by the finance ministry, the caretaker government performed much better in debt management than the previous regime. It is critical to pursue prudent debt management in the months ahead to free the country from the shackles of debt.
