News Analysis |
Amid the daunting economic challenges facing Pakistan’s ailing economy, the newly elected coalition government in Pakistan has decided not to consult the International Monetary Fund (IMF) for now. Last week, in the meeting of the newly reconstituted and much scrutinized Economic Advisory Council (EAC), the government has pinned its hope on other limited options available in its kitty. Nevertheless, none of the members ruled out the 15th IMF program.
In the first meeting of the EAC with Prime Minister Imran Khan, on August 06, the council suggested revising the populist budget from the previous regime to woe the voters. Since the external financing gap, this year is expected to be at least $9 billion, PTI government is hoping to bridge the gap by taking some extraordinary measures. Some of these radical and out of the box/steps include a year-long ban on imports for cheese, cars, mobile phones and fruit that could save some $4-5 billion.
The financial crises forced the government to kick-start the austerity measures to ease of the pressure on exchequer struggling to cope with increasing demand for the dollar.
Pakistan faces a huge battle on the external front. The ever-shrinking foreign exchange reserves hover around of $10 billion—which scarcely covers the two-month import bill, the balance of payment gap crises, and plunge in rupee had put the country on brink of the financial disaster. PTI government never took a clear-cut position on going to IMF, but the majority of the economists are still convinced that eventually, the country would go to IMF. PTI government is the biggest advocate of self-reliance.
Nevertheless, critics are bashing the ex-corporate wizard and have urged the Finance Minister Asad Umar to put forward the government’s clear-cut policies. America’s call to make the expected IMF-loan conditional to avoid the loan payments to China extended under CPEC, its decision to block $300 million of Coalition Support Fund and Pakistan inclusion in grey-list by FATF has put an extra pressure on the country to take precautionary steps going forward.
America has certain clout over IMF and Pakistan has the options on the table to consult China, Islamic Development Bank, and Asian Development Bank for additional funding. PM Khan-who often quoted the John Perkins famous book ‘Confessions of an Economic Hit Man’ in his political rhetoric must be moving forward with a certain degree of caution.
After all, Perkins clearly exposed the American strategic design to use the institutions like IMF and World Bank to extend the massive loans to developing countries like Pakistan—which make it exceedingly difficult for it to repay. It eventually guarantees that the developing nation will support the political interests of the U.S. Previous regimes in Pakistan favored IMF because IMF programs ensure that select few get richer and richer at the expense of poor.
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If Pakistan is to avoid the IMF’s clutches, it must proceed quickly and may have to take unpopular measures against the promises made during the campaign trail. The financial crises forced the government to kick-start the austerity measures to ease of the pressure on exchequer struggling to cope with increasing demand for the dollar. On the backdrop of macroeconomic mismanagement and questionable economic policies, Pakistan’s external position remains highly vulnerable putting Pakistan rupee under huge strain. Under FM Asad Umar’s leadership, Pakistan is hoping to take some radical measures to uplift the strained-economy out of the financial quagmire.