Eastern Eye (UK)
IMF deal ‘can only be temporary solution’
TOUGH BAILOUT CONDITIONS WORRY ISLAMABAD AS CRISIS DEEPENS
AN IMF team left Pakistan last Friday (10) after crisis talks with the government failed to deliver a deal on financial aid that would help the country avert economic collapse.
After months of deadlock, the International Monetary Fund delegation arrived last week for last-ditch negotiations with a government fearing the political consequences of enforcing bailout conditions in an election year.
Pakistan’s economy is in dire straits, stricken by a balance-of-payments crisis as it attempts to service high levels of external debt amid political chaos and deteriorating security.
Inflation has rocketed, the rupee has plummeted and the country can no longer afford imports, causing a severe decline in industry.
“Considerable progress was made during the mission on policy measures to address domestic and external imbalances,” the IMF said in a statement. “Virtual discussions will continue in the coming days to finalise the implementation details of these policies.”
The IMF is demanding that the country boost its pitifully low tax base, end tax exemptions for the export sector, and raise artificially low petrol, electricity and gas prices meant to help low-income families.
Prime minister Shehbaz Sharif previously called the conditions for the $1.2 billion (£985 million) loan instalment “beyond imagination”.
The finance minister, Ishaq Dar, addressed the nation after the IMF team left the country last Friday morning, saying talks had “concluded successfully” and that a draft memorandum on broadly agreed policies had been shared by the lender with the government.
He said petrol prices would rise by roughly four per cent and additional taxes would be imposed, without giving further details.
Abid Hasan, an economic analyst and a former adviser to the World Bank, said “there will be disappointment in the business community”.
“The only way that stability can be achieved is through a deal. This has heightened the uncertainty,” he said in Islamabad.
Years of financial mismanagement and political instability have damaged Pakistan’s economy – made worse by a global energy crisis and devastating floods that ravaged the country.
After months of holding out in search of alterna