It was famously said “There ain’t no such thing as a free lunch” and that clearly applies to the International Monetary Fund’s Stand-By Arrangement with Pakistan, whereby it is to give it $3 billion over nine months. The IMF has made public its staff report on the new SBA, which has succeeded the last ESAF, and it makes it clear that some of the problems of the Pakistani economy are to be tackled, but the focus is on the 2023-2024 Budget passed last month by the National Assembly. One of the conditions of the loan is that there are to be no tax amnesties. Another condition is going to make the consumer scream, as both power and gas tariffs are going to go up. Apparently, the IMF does not see any other way of tackling the circular debt problem which long bedevilled the power sector, and is now developing in the gas sector.
Of interest is the insistence on the need to coordinate the interbank and open-market rates did not exceed 1.25 percent for more than three business days. At present values, that works out to about Rs 4. That means the sleight of hand associated with Finance Minister Ishaq Dar is ruled out. Senator Dar believes that the country is suffering imported inflation, because of the falling ‘s travails are not overstanrupee. At the same time, the IMF must concede that it and Senator Dar think alike. After all, the IMF is also much concerned about foreign exchange, and has strongly criticized his moves to conserve foreign exchange. While Pakistan cannot claim to be out of the woods, whatever the coalition government might say, it has seen some positive developments, After the IMF’s SBA and the Saudi and UAE deposits, there has been a roll-over from the Chinese Exim Bank, which means a further improvement in the country’s reserves. That has been behind the current account surplus recorded for the fourth consecutive month in June, which meant that the final deficit was $2.56 billion, a signal improvement on the $17.48 billion the previous year.
The IMF’s own report indicates that Pakistan’s travails are not yet over. It says that there must be continued adjustment and creditor support after the SBA is over. Clearly, the breathing space the SBA represents is not to reconstruct or reform the economy, but merely to transition to a freshly elected government. Clearly, there is a greater need than ever for a Charter of the Economy, so that creditors can support the country knowing what economic policies are being followed.
