Pakistan and the IMF have finally reached staff-level agreement for release of a $1.17 billion loan tranche. While IMF’s Executive Board has yet to approve the deal there is a perception that after Pakistan’s commitment to take any additional measures suggested by the Fund, the Board’s approval is just a formality. The agreement will put an end to doomsday scenarios that were being painted by PTI chief Imran Khan and those around him. The agreement ensures that the country is neither going to default nor turn into another Sri Lanka if the governmentt sincerely implements the accord. The agreement has generated positive signals with the rupee gaining Rs1.60 in the interbank market and the KSE-100 going up 1.16 percent as the market cheered revival of the IMF programme.
Pakistan does not possess sufficient foreign exchange to buy coal or gas to generate power, purchase wheat and edible oil for its population and chemicals, machinery and spare parts for its industry and agricultural sector. The agreement provides Pakistan a certificate of financial credibility. Besides the release of the IMF tranche, Pakistan will now be able to secure loans from international financial orgnisations and friendly countries. The accord will hopefully lead to the improvement of the country’s ratings that will encourage investors and bring better returns for government bonds.
With the IMF package available the government is expected to concentrate on providing relief to the poor and the lower middle class which are currently suffering most from inflation and high unemployment. Internal shortages, disturbance in global supply chain and war in Ukraine have all contributed to a rise in prices and reduction in purchasing power. The rise in inflation, that touched a 14-year high of 21.3 percent in June, is an economic issue that can have grievous political implications for the parties in power. While Federal Planning Minister Ahsan Iqbal does not consider corruption a major hindrance in economic development, IMF thinks otherwise. It supports a comprehensive review of the anti-corruption institutions, including the National Accountability Bureau, to enhance their effectiveness in investigating and prosecuting corruption cases.
