Pakistan has recently finalized the deal with the International Monetary Fund (IMF) to help the country overcome a deepening economic crisis. Under the current IMF deal, Pakistan is about to receive a three-year assistance package of 6 billion USD along with “an ambitious structural reform agenda.” The original plan to seek assistance from IMF was drafted by Former Foreign Minister Asad Umer, who predicted in an interview that this is going to be the last IMF loan of Pakistan. Now that Asad Umer is no more in the cabinet, the possibility of this IMF loan being the last one is near to the ground. Now after the reshuffling of ministries new finance ministry will come with new policies or going to follow the same pace?
Reshuffling of Ministries:
Former Finance Minister Asad Umer was a strong ally and the prime choice of Prime Minister Imran Khan for improving the economic condition of the country. However, soon after becoming the Finance Minister, he received criticism for opting to go for IMF loan – something his party has been very critical of during the election campaign. Questions were raised over the poor performance of the Federal Board of Revenue (FBR), weak economic policy, and surging exchange. Unable to deal with the growing criticism, Prime Minister decided to reshuffle the cabinet. Unlike other ministers who opted for another ministry in place of the old one, Asad Umer resigned from his position.
Ironically, the resignation came days after he returned from talks in Washington with the IMF and had already announced that the talks are about to conclude in a few days. He seemed very positive about his talk with the IMF in his meeting with a delegation of stockbrokers at the Pakistan Stock Exchange in Karachi. During the question-answer session, he predicted healthy growth in exports and a shift of Pakistan economy towards the right direction. It was in this meeting, when he predicted that next IMF loan is going to be the last IMF loan of Pakistan.
PTI economic policy includes inflation will be brought down, the industry will grow, and eventually, the economy of the country will grow at an average of more than 6% and so on. Moreover, in PTI 100 Days agenda, Asad Umer claimed that they will reform the tax administration and for that purpose, they will launch FBR reform and share a business-friendly and equitable tax policy to revive the economy and reduce the debt dependence which government fails to achieve yet. Now when the Finance Ministry is changed, the question here is will government continue using the same economic policy or going to change their policies to overcome economic crises?
Dr. Hafeez Shaikh Again?
The prime factor that shows a shift in PTI’s economic policy is the man they chose in place of Asad Umer. Dr. Hafeez Shaikh, appointed as the advisor to prime minister on Finance, Revenue, and Economic Affairs, was the finance minister during the last tenure of Pakistan People’s Party. He resigned from his position as he was nominated for the slot of the caretaker prime minister.
Another argument by oppositions is that Hafeez will follow the IMF orders tactics because he was affiliated with the World Bank as country head of Saudi Arabia, as a senior official advisor to 21 countries. Asad Umer refused to accept harsh conditions of IMF which would harm national interest and subject the people to unbearable hardship.
The conditions IMF attached for a new assistance program are not congenial, which include devaluation of Pakistani currency, drastic decrease in fuel and energy subsidies, an end to the practice of using the State Bank of Pakistan’s foreign exchange reserves, a significant decline in Public Sector Development Programme to reduce fiscal deficit and the privatisation of major loss-making state-owned enterprises. Dr. Hafeez has to make some tough decisions to improve current economic situation of the country. The current economic situation reflects how the government has handled or we can say mishandled various challenges. The biggest challenge for our economic policymakers is to ensure that the stabilisation phase following the introduction of economic reforms is not prolonged. The other part of this challenge consists of the need to take the economy to a growth rate of 5.5-6 percent in the next three years.
The Dark Picture
Making this loan, the last IMF loan requires tough decisions. With the current economic condition and the government’s, the government level of commitment, and the sense of responsibility, there is no increase in domestic productivity and the hike in prices is multiplying the difficulties of the people. So far, there is no progress in policies. Weak policies are leading to an increase in macroeconomic vulnerabilities. If the implementation is something just like the Former Finance Minister’s glacial pace, it is not going to be enough. Dr. Hafeez Shaikh has to make a new economic policy and if government doesn’t improve its economic policy then this loan won’t be Pakistan’s last International Monetary Fund loan.