Pakistan and the International Monetary Fund (IMF) on Tuesday reached an agreement to revive the stalled $6 billion programme after Islamabad agreed to rationalise expenditures, increase electricity prices and to slap additional taxes. The agreement, subject to the approval of the IMF board, would pave the way for release of $500 million third loan tranche.
“The IMF staff and the Pakistani authorities have reached an agreement on a package of measures to complete second to fifth reviews of the authorities’ reform programme,” according to a statement issued by the IMF from Washington. An IMF team led by Ernesto Ramirez Rigo, concluded virtual discussions with the Pakistani authorities and reached a staff-level agreement to club four pending reviews and then make a request for release of $500 million tranche, subject to implementation of certain conditions.
he revival of this stalled programme comes as glad tiding, indeed, for the government amid its struggle to overcome the adverse financial impacts of COVID-19. Yet, the $6 billion deal cannot be called anything that it is not. A bailout! Our thirteenth in the last 30 years. And every bailout comes with its own set of brakes.
With the fresh tranche, the total IMF disbursements to Pakistan would reach $3.36 billion — including $1.4 billion worth of emergency support related to Covid-19. Before agreeing to revive the loan programme, the IMF also wanted progress on issues including: consolidating SBP’s autonomy; strengthening legal frameworks of regulatory agencies like Nepra and Ogra; and improving management of stateowned enterprises most of which continue to inflict heavy losses on the exchequer.
While an autonomous central bank, independent regulators, and financially viable state-owned enterprises would be good macroeconomic achievements, they may not necessarily mean good news for the common man. Besides, the government is also reported to be completing the process of pruning tax exemptions so as to bring them into effect in the next federal budget. It goes without saying that these measures are unlikely not to make life difficult for the common man as well as the business community, at least in the short- and medium-term.
However, this entry into IMF has given rise to a big question that since the government has been telling the people for a number of months now that the economy is on the right track and that the foreign exchange reserves are improving and the current account is in surplus, what exactly is the need to re-enter the programme? he IMF should be seen as the ICU of economies, a place where countries go when they are facing a severe crisis. So the act of re-entering the Fund programme at a time when the government’s ministers are regularly reminding us that the economy is improving and growth picking up appears contradictory, and this question needs to be answered by those managing the economy.
This program may prove a disaster for the poor and middle class because IMF program has always string attached and it is ultimately the middle and lower class that will be perished under the IMF package. However, this begging bowl is crushing poor since years so this might not be a new thing for a Government that was once vocal against this bowl.