IMF program: is the country out of financial trouble?

Waheed Hussain

Thank you, International Monetary Fund (IMF), for releasing $ 1.2 billion tranche under the recently agreed $ 3 billion Standby By Arrangement Program for the period of 9 months. According to Finance Minister Senator Ishaq Dar $ 4.2 billion has been deposited in the State Bank of Pakistan account during a week’s time. Dollars from the friendly countries like Saudi Arabia $ 2 billion and UAE $ 1 billion added to the SBP foreign reservesonly after the IMF agreed to the new financial loan plan.

Apart from the IMF Managing Director Kristalina Georgieva, the other staff of the Fund both in Pakistan and in Washington has played a vital role in approving the new program, which would provide a breathing space to the starving financial condition of the country and will also avoid the much talked about “default.”

The United States of America also played a decisive role in convincing the IMF to approve $ 3 billion dollars SBA program. As we have been informed through the media that the US ambassador to Islamabad H.E Donald Blome held a series of meetings with the Finance Minister Ishaq Dar in past few weeks extending full support to Pakistan in achieving a breakthrough with the IMF.

Behind the seen constructive efforts of the US administration helped Pakistan to get the loan from the fund, which had been very tough with the finance ministry negotiating team during 9^th review early this year,on the vital issues, including revenues and expenditure plan of the government, lowering energy circular debts, structural reforms in the various public sector enterprises, market determined exchange rate and increase in the policy rate of the SBP.

The Prime Minister of Pakistan Shahbaz Sharif also held various interaction with the US Ambassadorto Pakistan with same purpose. Its not the first time that the US administration has supported Pakistan to strengthen its financial position, to save the country from any possible default, it has been playing the same role in the past as well, depending on its relationswith the government in Islamabad.

The US Secretary of State Antony Blinken tweet about approval of the IMF program for Pakistan speaksa lot, “We stand by the Pakistani people during these hard times and welcome the International Monetary Fund’s approval of a program to support Pakistan. We urge Pakistan to continue working with IMF toward macroeconomic reforms and sustainable economic recovery.”

The PDMgovernment has been struggling with the IMF since it took power in April last year. after the removal of PTI government through a vote of no-confidence. The PTI government, which entered a $ 6 billion 39-months Extended Fund Facility (EFF) program in 2019 with the IMF, abandoned the program just before its departure from the government on certain taxes and subsidies related issues.

Later, the two PML (N) finance ministers MiftaIsmahail and Ishaq Dar constantly blamed the PTI government for signing aunrealistic and tough agreement with the IMF,which burdened the masses with price hike and put the current government difficulty. The prime minister in his recent address to the nation once again castigated Imran Khan government for the economic and financial policiesand held him responsible for the present bad economic conditions.

Wellin Pakistani politics, every new government blames the previous one for the economic and financial devastation. Imran blamed the PML (N) in 2018 while the PDM is doing the same today. The best solution was that the present government should have disclosed the 2019 IMF agreement to the masses telling them who actually was responsible for the financial and economic destruction in the country.

The debts are hitting the citizens and country badly. We need debts to pay back the debts and interests. Recently, the IMF has projected rising external debt by $12.975 billion, going up to $136.549 billion in the ongoing fiscal year against $123.574 billion in the last financial year 2022-23. It also projected that the external debt would go up to $142.137 billion in the fiscal year 2024-25, $146.770 billion in the fiscal year 2025-26, $150.138 billion in 2026-27 and $152.138 billion in the fiscal year 2027-28.

We are in a debt trap. How can we get out of it? A billion dollars question. We have seen a rapid increase in our internal and external debts since 2002. We need strict financial management. We need a debt management policy. We need to rely on our own resources. We need to keep a balance between our income and expenditure. Successive governments had been over-spending by getting loans from IFIs and friendly countries. Good loans are for development projects, while the bad loans are for debt servicing. How long we could survive like this? How long our Prime Ministers and Finance Ministers would keep on begging the friendly countries like China, Saudi Arabia, UAE, and others for the favor. Enough is enough. Our main political parties,especially those which are aspiring to form the next government, should come up with a clear economic and financial plan.

Pakistan has been getting dollars from IMF since 1950s.Whenever our governmentrequests the IMF for the loan, politicians and people accuse the international financial institution of the strict conditionalities. The governments impose new taxes, remove subsidies resulting in an increase in price hike-inflation, again the target is the IMF.

Whatever is negotiated and agreed by any sitting government must be implemented to get the dollars from the Fund. The propaganda of the politicians has become so strong that masses believe that the country’s financial and economic decisions are being taken by the IMF. Which is totally wrong. What the IMF demands from any government which goes into a loan agreement,financial management.

IMF asks our governments to end budget deficit, to increase revenues to run the country and pay the loans from its own resources, to reduce power and gas losses (control the circular debt). Restructure PIA, Railways, Steal Mills, and other public sector enterprises to end their thousands of billion rupees losses. It wants a smart and efficient governance system to save national resources. It wants to expand the tax net to increase revenues.

Why did our successive governments fail to bring any reforms in state institutions. Our politicians,especially the bureaucracy, must educate the masses about all the lending agencies that whatever money through the taxes is being collected goes to the government kitty. I request the political leaders that bring reforms in state institutions, and governments should generate financial resources to run the country —-stop going to IMF, Saudi Arabia, or China for any loan, which brings a bad name to Pakistan.

No Pakistani likes that any of their Army Chiefs should be visiting countriesrequesting them for loans. It’s not their job. Financial and political management is the job of political leadership of the country. If we really want to live a respectable life, we must set our house in real order. Political stability is the foundation of economic and financial prosperity; therefore, leaders of all political parties must give up their personal agendas and develop political consensus. If they could?