The critics of Prime Minister Imran Khan are firing all
sorts of shots at him. The biggest blame is that the person who didn’t want to
approach International Monetary Fund (IMF) has conveniently bowed down rather
than making an effort to live without the crutches of lender of last resort.
Khan has been critical of borrowing during his election campaign, might be that
he failed in understanding the gravity of situation. Let everyone try to find a
logical reply to the basic question, will abstaining from borrowing from IMF save
Pakistan from committing default? The immediate and logical reply is a big no
because the countries that were most likely to extend supporting hands have
done the contrary.
Therefore, it is imperative for the ruling regime to strike
the best deal and it is also the responsibility of the opposition to help the
incumbent government to have consensus on a home grown plan to make debt servicing
sustainable. Let PML-N and PPP leadership not forget that they ruled the
country for 10 years and supported each other under the much talked about
‘Charter of Democracy’. The country would have not faced the present crisis,
had they followed ‘prudent policies’, contained extravaganzas and corruption
and supported flight of capital from Pakistan. The ongoing investigations
indicate that Pakistanis have parked billions of dollars outside Pakistan, own
properties and doing thriving business in many neighboring countries.
After the victory in election, Khan was assured support by
United States and Saudi Arabia and told not to approach Iran. Now it is evident
that that these countries were willing to extend financial support to Pakistan,
only if it agrees to support their geopolitical agenda. The US was prompt in
instructing IMF not to lend any money to Pakistan to pay off Chinese debt. The
much talked about Saudi oil facility and credit has not come to Pakistan, till
this article is going into print. In such a hostile environment Pakistan has no
option but to approach IMF and accept its stringent conditions.
Two of the most contentious issues faced by Pakistan are
growing current account deficit and shrinking foreign exchange reserves.
Therefore, the first target is establishing a ‘lifeline’ before the patient
goes into coma and chances of recovery diminish. It may also be kept in mind
that issue of ‘Certificate of Health’ by IMF also facilitates in borrowing from
other multilateral lenders that include the World Bank, Asian Development Bank
(ADB) and International Finance Corporation (IFC). This may also pave way for
disbursement of loan by Islamic Development Bank.
Those who do not believe in my narrative, should look at the
movement of US$-Rupee parity over the last few days. Till it was not clear that
Pakistan will approach IMF and would also receive an encouraging reply, stock
market kept plunging and the benchmark index of Pakistan Stock Exchange kept
registering erosion of a magnitude that was hardly witnessed in the recent
years. However, the situation started reversing after Finance Minister, Asad
Umar met IMF Chief. Though, a lot of clarifications are yet to be made, the
commitment by multilateral lenders have started pouring in. Someone has said it
right that the markets are impervious to emotional appeals, and investors
cannot be inspired or persuaded, other than through the cold inducements of
gain and loss.
The likely IMF bailout package is certainly not enough to
pull Pakistan out of the ‘default like situation’. However, it offers the space to take
corrective steps and put the economy on track. The next but biggest challenge
will be to undertake much delayed structural reforms. Almost all the previous governments
have promised that while approaching IMF but many failed in fulfilling the
commitments.
I will not hesitate for a second in saying that Imran Khan
is the propagator of change but he is still surrounded by those who are known
for maintaining status quo. Pakistan suffers from ‘confidence deficit’ that is
a far bigger threat as compared to budget or current account deficit. What
needs to be done is comparatively straightforward and the best path forward can
be mapped out quickly as well as the PTI leadership has no shortage of competent
people to make Imran Khan’s dream come true.
Khan has a strong social media team that can play a pivotal
role in changing the perception, but the real issue is to change the ground
realities. What need to be managed urgently right now are the fundamentals not
the perceptions. That is where the prime minister’s focus is immediately
required.
To put the country on the fast growth trajectory, it is
necessary to point out that IMF recipe of raising electricity and gas tariffs,
hiking interest rate and withdrawing subsidies could prove fatal blow to
country’s economy. It is known to all and sundry that Pakistan suffers from
cost pushed inflation that also renders ‘Made in Pakistan’ goods uncompetitive
in the global markets. Unless exports are boosted containing current account is
not possible. Boosting remittances may bring some additional dollars, but
producing exportable surplus and attaining competitive advantage is a must.
PML-N and PPP regimes are known for extravaganzas and
wastages; PTI has to follow austerity by discouraging import of luxury items.
In a country where a huge percentage of population lives below the poverty
line, there is no room for import dog food, luxury cars, expensive mobile
phone. Let Pakistan follow the models that enabled Turkey and many other
countries to bid farewell to IMF. The citizens of Pakistan ought to thank IMF
for the 18 assistance program, but will also have to learn to live within
means. It is not difficult but needs solid commitment and support by all the
political parties.
