All assurances of political fair play were given. Backchannel entreaties were made. Finally, on January 11, the Executive Board of the International Monetary Fund (IMF) approved the release of the second tranche of loan amounting to $700 million, to materialize the nine month Stand-By Arrangement. Out of the total permissible $3 billion bailout package, only $1.1 billion are left, earmarked for the forthcoming elected government, which is due to take over by March.
The disbursement will do two immediate things: First, it will stabilize Pakistan’s rupee; and second, it will help Pakistan secure financial loans or seek rollovers from friendly countries such as China, Saudi Arabia and United Arab Emirates – the three mainstay of Pakistan financial viability. Any missing link would have made Pakistan see falling into an abyss of crisis.
The basic objective of the IMF loan is to offer Pakistan the requisite latitude for economic stabilization – a period of respite to avoid sovereign default – and to make Pakistan think over its options for economic survival. The main focus is to address the immediate needs of the economy such as reducing circular debt and mitigating trade deficit. Nevertheless, economic stabilization is occurring on the brink of default, on which Pakistan is still standing, though the IMF is preventing Pakistan’s fall.
‘Global Health Security Summit projected positive image of Pakistan globally’ For withdrawal from the edge of the cliff, Pakistan has to mould the model of economy that it follows. Presently, Pakistan embraces an economic model which predicates on high expenditures (especially non-development expenditures) and low income (replete with tax exemptions and subsidies). The model is ruining Pakistan. Interestingly, there has flared up a tug-of-war between the national institutions which spend high by practice and those which collect low by capacity. Each blame the other for Pakistan’s plight.
Interestingly, the third tranche is due in March (for spending till the end of June), but it would not be automatic. The second tranche was approved in mid-November 2023, but it was delivered after more than one month, after the IMF ensured that Pakistan had met almost all the given targets. The third (and final) tranche would not be without similar practice.
On February 18, on the sidelines of the Munich Security Conference, through its Managing Director, Kristalina Georgieva, the IMF made it clear to Pakistan that the country should stop thinking about the restructuring of debt, the cost of which would be unbearable for Pakistan. A bankrupt Pakistan would lose credibility in the eyes of the creditors. No space for any sovereign default. In such a scenario, the IMF and its lenders would take over the country to recover their money. Pakistan will lose all veneers of sovereignty. Hence, the better option is to restructure the economy. Pakistan’s fear of crisis fails to disremember Sri Lanka. In fact, Sri Lanka’s experiencing bankruptcy in 2022 has made Pakistan wise.
Anti-polio immunization drive continues In the beginning of March, the major task in front of the newly elected government would be two-pronged: first, begin negotiations with the IMF to secure the third tranche; and second, frame the budget as per the demands of the IMF. The next budget would be dictated by the IMF more minutely than before. Little discretion would be available, compared to the budget for the Financial Year (FY) 2023-24. After that, Pakistan would enter a new three-year loan-program with the IMF. It means that not only the budget of the FY 2024-25 but also next three budgets would be dictated by the IMF – and Pakistan still believes in sovereignty.
The economic stranglehold will be steady and immense. With the given (or even projected) pace of economic growth of 3%, and high inflation of 30 percent, it is not easier for Pakistan to come out of the dictating sway, unless a wind fall visits the country. Presently, Pakistan is waiting for the realization of certain promises of foreign investment in the agriculture sector.
Chairman BISP emphasizes digital literacy, financial inclusion of needy women The IMF has secured a firm grip not only over Pakistan’s economy but also over Pakistan’s politics. Contrary to the past (awash with showers of windfall), when the political system enjoyed autonomy and ran independent of the economy, the present offers no such facility. Now, Pakistan’s political system is entrenched in – or even getting intermingled with – its economy. No political government can make a budget dissociated from the state of economy.
In this age of economy-overwhelming-politics, a significant change has been witnessed in the approach of international players attached to the IMF. For instance, on December 22, 2023, through a tweet, Riina Kionka, Ambassador of the European Union to Pakistan, expressed her deep worries over mishandling the participants of the Baloch Long March in Islamabad. She reminded Pakistan of its responsibilities towards the freedoms of expression, assembly and association guaranteed in Articles 19, 21 and 22 of the International Covenant on Civil and Political Rights, which is a core measure of the GSP-plus implementation, and to which Pakistan is a party. Similarly, on December 29, 2023, Antony Blinken, Secretary of State of the United States (US) declared Pakistan (one of twelve countries which are) a “Country of Particular Concern”: a country which is engaged in or which has tolerated severe violations of religious freedom. The US espouses advancing freedom of religion or belief a core objective of its foreign policy.
Two killed, woman injured in separate incidents After securing the second tranche, Pakistan would feel an economic ease. Nevertheless, the creditors of the IMF have been watching Pakistan closely – perhaps more meticulously than before. Any effort to dissociate politics (read, political rights) from the economy would cost Pakistan a lot.
Dr Qaisar Rashid
The writer is a freelance columnist. He can be reached at qaisarrashid@yahoo.com
Economic Ease
30
1
13.01.2024
All assurances of political fair play were given. Backchannel entreaties were made. Finally, on January 11, the Executive Board of the International Monetary Fund (IMF) approved the release of the second tranche of loan amounting to $700 million, to materialize the nine month Stand-By Arrangement. Out of the total permissible $3 billion bailout package, only $1.1 billion are left, earmarked for the forthcoming elected government, which is due to take over by March.
The disbursement will do two immediate things: First, it will stabilize Pakistan’s rupee; and second, it will help Pakistan secure financial loans or seek rollovers from friendly countries such as China, Saudi Arabia and United Arab Emirates – the three mainstay of Pakistan financial viability. Any missing link would have made Pakistan see falling into an abyss of crisis.
The basic objective of the IMF loan is to offer Pakistan the requisite latitude for economic stabilization – a period of respite to avoid sovereign default – and to make Pakistan think over its options for economic survival. The main focus is to address the immediate needs of the economy such as reducing circular debt and mitigating trade deficit. Nevertheless, economic stabilization is occurring on the brink of default, on which Pakistan is still standing, though the IMF is preventing Pakistan’s fall.
‘Global Health Security Summit projected positive image of Pakistan globally’ For withdrawal from the edge of the cliff, Pakistan has to mould the model of economy that........
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