Economic matters must supersede politics

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KARACHI, JUL 9: Former Vice President of FPCCI Atif Ikram Sheikh said on Sunday economic compulsions must overtake politics as the survival of the country is at stake while our future is linked to a strong economy.  

The IMF’s deal has improved investors’ confidence and their tough reform preconditions are a must for economic recovery, which is badly needed, he said.

Atif Ikram Sheikh who has also served as President ICCI and Chairman PVMA said in a statement issued here today that Pakistan was going through economic turmoil since last year and was desperately seeking IMF bailout to avoid a default. 

On June 23, the IMF announced an SBA, a bailout package of $3 billion for nine months; China provided a rollover of $3 billion, while Saudi Arabia and UAE also helped Pakistan with billions of dollars which has improved the overall situation, he observed.

The former government had negotiated the IMF bailout package of a $6.5 billion loan programme in 2019 to be delivered over three years but decided not to implement the reforms for political reasons, leading to suspension of tranches by the lender.

IMF’s loans always draw criticism while loans from other sources which are costly and never debated, he said, adding that many of the bilateral financiers always look to the IMF’s decisions before extending the financial bailout packages.

Atif Ikram Sheikh said that many believe IMF’s structural adjustment programmes do not consider local realities; its emphasis on a free market economy impacts the poor and their other conditions hurt masses, therefore IMF programmes remain unpopular for the populist governments worldwide.

In Pakistan, the governments regularly announce subsidies to address rising prices and win over the electorates, but these subsidies are not sustainable and add to the budget deficit.

However, IMF programmes come with several conditionalities that are considered harsh on the poor, as it insists on removing subsidies and reducing the budget deficit and other “non-essential” expenditures.

Many governments criticise IMF conditions, yet they see the lender’s support as the only means to gain confidence of creditors’ confidence.

Pakistan must now reform the power sector so that the cost of electricity is recovered, remove all tax exemptions to boost revenue, improve foreign currency reserves, reduce the budget deficit and allow market determined exchange rate, he demanded.

We are in an election season, during which the IMF conditionalities will put serious pressure on the populist measure of the government, but hard economic decisions have to be taken to save the country, he said.