The IMF talks

The Pak Banker - - FRONT PAGE -

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.

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