The IMF talks
The government is formally negotiating bailout from the IMF after the arrival of a delegation from the international lender last week. However, there is still confusion over exactly what kind of assistance the PTI government is looking for owing to the short measures by the government itself. Only a few days back, after returning from China, Finance Minister Asad Umar claimed that Pakistan had sorted out its current account deficit. Moreover, there has been talks of the creation of a ' wealth fund' to turn loss-making public-sector enterprises into profitmaking ones before selling them off. To start with, why would one spend billions to make a public-sector enterprise profitable only to sell it off? Privatisation may or may not work, but if the plan is to privatise, why put in billions more into these enterprises?
While the finance minister might not want to admit it, there are rumours that the government will be looking for a $4 to 6 billion loan from the IMF. One must wonder what the situation would be if the massive cuts to development budgets initiated by the PTI had not taken place. Just to cover the current account deficit for the current year, the government is looking to pile on around $18 billion in debt, including the $6 billion from Saudi Arabia and the expected $6 billion from China. With the IMF delegation around till November 20, the government still has an opportunity to reconsider the course of action it has adopted.
More word on this is expected this week. There are, however, serious concerns about how the financial deficits are being managed. For example, the IMF asked the government where the money for the socalled 'wealth fund' would come from. The answer was not very convincing. The PPP has asked for transparency over loans from international lenders in the National Assembly. The effects of the loans are likely to be felt by the common citizen - and another small drop in the value of the rupee to the dollar already has people worried. Not only are the prices of utilities increasing, a further drop in the dollar-rupee ratio could send the prices of essential commodities to the sky.
Whatever agreement is made with the IMF, it will need to take a serious stock of its short-term and long-term effects. The system of seeking loans to run countries is prevalent in many nations and ours is no exception. But the government must adopt a rational policy because 18 billion loans will cover our balance of payment crisis but this huge loan will bring some menaces in the form of rise in gas, electricity and other utility bills and the masses which are already crying due to increase in gas and power tariff will be left in lurch.
Moreover, it is also important to see how new govt utilises these loans. The previous governments also took huge loan with the claim to fix the economy but at the end of their terms, the government failed to achieve the required results and country further went into abyss of the foreign loans.