After prolonged discussions over several months, International Monetary Fund (IMF) has finally granted yet another financial bailout to Pakistan. Advisor to Pakistan Prime Minister on Economic Affairs Dr.Hafeez Sheikh said that the bailout has been cleared in the final round of consultations between Pakistan and visiting IMF team. IMF will provide $6 billion to the country in the next 3 years to overcome its financial crisis. Islamabad is in deep debt and is running a shortfall of $18 billion to meet its financial obligations and run the country’s economy.
Eight months ago, when Imran Khan was elected as the country’s Prime Minister; he had said that he would not seek an IMF bailout if it put tough conditions for such assistance. He banked more on friends like China, Saudi Arabia and the UAE. But IMF, has been adding fresh conditions for the package and Imran Khan ended up accepting almost everything the IMF asked for. The conditions include steep monetary readjustments and fiscal realignments, raising the tax rates to generate higher revenues, wide ranging structural reforms, curtailment of subsidies, and adopting market determined exchange rates etc.
Imran Khan hasbeen on record saying he would not raise taxes and increase electricity and gas charges as that would subject the people to further difficulties. The measures would mean cutting down incomes and increasing inflation. The country is already facing rising prices of all essential commodities. Pressure from Financial Action Task Force (FATF) has also played a role since Pakistan is already in the grey list and runs the risk of being pushed to the blacklist if necessary.
That the Pakistan Prime Minister ousted both the Finance Minister Asad Umar and the Governor of the State Bank of Pakistan Tariq Bajwa and replaced them with former IMF officials indicates that the country’s economy is in a virtual free fall. GDP growth has fallen to 3.9 % and inflation has touched 9.4%. Foreign exchange reserves have fallen to just $9 billion.
In such a dismal situation Imran Khan had hardly any choice but to accept the IMF terms. This indicates that Pakistan needs strict financial discipline which hinges on two important factors. One, terrorism has to be curbed with a very heavy hand to allow for peace and release of funds for development activities and two the political decisions of the country must be left to the Civil government and Army must restrict itself to the role of taking care of security of the country.
Funding of terrorist organizations in Pakistan has become a major concern for the global community which is preventing the country from taking soft loans from other countries and institutions to steer its economy from the existing turmoil. Of late, there has been a surge in terror attacks in Pakistan.The latest being the one on the only five star hotel in Gwadar city of Baluchistan. Five persons were killed in the attack for which the Baluchistan Liberation Army (BLA) has claimed responsibility. Earlier, 14 persons were killed in Harnai district of Baluchistan when passengers were asked to disembark from a bus and shot dead. They included men from Pakistan Navy. Separatist movement in Baluchistan is going on for a long time and is spearheaded by BLA. People of Baluchistan complain that despite being the largest province of Pakistan gifted with all kinds of natural resources, it remains the poorest province of the country.
In fact the people of Baluchistan are up in arms against the China Pakistan Economic Corridor (CPEC) as well, most of which passes through Baluchistan but with no accruing benefits to the province. The attack on the Hotel is seen as part of the expression of resentment against the Chinese working on the project. Most of them stay in this particular hotel during their business trips. The IMF bailout is at best a temporary relief to run the country. Pakistani leadership needs to take a holistic view of the situation in its own interests.
Script: Ashok Handoo, Political Commentator