There has been nothing to indicate a revival of the Pakistani economy. Prime Minister Shehbaz Sharif did not get any significant help from either Saudi Arabia or the UAE, with the former agreeing to roll over its deposits with the State Bank of Pakistan, and the latter agreeing to vaguely worded joint ventures. The IMF has indicated that it will extend its current ESAF by two years, and lend an additional $ 2 billion under it, but all that will do is help Pakistan service the present ESAF, itself mainly used to service the previous IMF package. Mr Sharif will be left to use the last arrow in his quiver, China, and hope he can get some help from that direction. True, as Punjab CM he developed a good reputation as a doer, but it remains to be seen whether that can translate into.
Meanwhile, there was no foreign participation at the last Treasury Bill auction, even though the SBP has fixed its base rate at the highest in years, at 14.75 percent. That foreign investors are not willing to bring in funds even at such mouth-watering rates indicates that the change of regime has not created the impression of political stability. That is understandable, what with the ousted Prime Minister, Imran Khan, still on the warpath and threatening to create chaos.
The present government must realize that it will have to take difficult decisions. The landmines scattered by the PTI in its last days in office remain, such as the petrol subsidy. With the Russian invasion of Ukraine, which made it spike in the first place, nowhere in sight, the prospect of the budget collapsing is very real. The government should realize that the longer it puts off this step, the more unpalatable it will be to the public. This government has the unfortunate task of preparing the coming budget. It must gear up for that, which will involve successful negotiation with the IMF, and be ready to pay the unavoidable political cost. The PTI would probably not have done better at all, and the academic qualifications of the government team (both the Finance Minister and the Minister of State have PhDs) will not help when the economy is sputtering so violently.
