A Pyrrhic victory if there was one

IMF’s ‘prior conditions’ have become the government’ biggest problem just when it is facing its toughest time in office. They’ve got it going round in circles trying to score a victory that is sure to unleash a torrent of high prices and cut growth and, despite unlocking another billion from the Extended Fund Facility (EFF), also make the road to re-election all but impossible. There’s no option but to ensure that the mini-budget and State Bank of Pakistan (SBP) Amendment Bill pass through the assembly, of course, because we can’t survive without the EFF or the easy borrowing from other financial institutions that IMF’s greenlight would ensure. And also because it would send the kind of signals to the market that would finally put some sort of floor under the rupee; or so it is hoped.

But the government’s wafer-thin majority in the house and its usual problems with quorum, not to mention its attitude towards the opposition and also its own members and allies, means all this is going to be far easier said than done. There’s no chance of getting the opposition to play along, because nothing suits their narrative more than selling this agreement as the proverbial poisoned chalice that will burden the people to no end. And the PM himself is to blame for the fact that the prospect of sitting down with them is not even on the table, because he’s been avoiding talking to them about anything at all because of their alleged corruption all these years. And if that wasn’t bad enough, there are enough rumours circulating in the press to confirm that the said bills have not been shared so far with party members or coalition partners either; which explains the many stops and starts even though time has all but run out.

Now this is not something that you can try and fail at, and then just try again till you succeed. Information Minister Fawad Chaudhary tried to dilute the mini-budget by calling it “adjustments”, but that doesn’t change the fact that the IMF as well as the finance ministry called it a mini-budget in their communique because it is exactly that, and failure to get a budget through the assembly, no matter how “mini”, is also an automatic show of no-confidence in the sitting government. But now senior party members, especially those that hopped onto it just as it was winning the last election, as well as partners holding up the government, are worried about the inflationary implications of the mini-budget and what it might mean for their chances in the next elections; especially after the humiliating loss in the KP local government elections. That’s why it beggars belief that nothing has yet been done to bring them around. It also explains why pundits are betting that the government would have to place one more of those calls to the so-called establishment to clear this hurdle; just like at the time of the joint session.

Let’s not forget that while the government’s been figuring out what to do the rupee has set about 13 all-time lows against the dollar in December alone, needlessly bloating the debt that it is going through all this trouble to get more money to pay back. And since so far nothing has stopped its fall, not even the desperate Saudi loan, and there’s nothing in current account or trade balance trends to suggest that it is going to bottom out on its own, clinching the IMF deal has become a very urgent matter. Now it remains to be seen if the PM can rally his troops one more time or if some outside help is going to be needed once again.

Either way, this will still be a victory with a very high opportunity cost. With the interest rate on the rise once again and the mini-budget cutting subsidies and tax breaks and imposing yet more taxes, it will no longer be possible to blame previous governments and international commodity prices for the next wave of high inflation that will devour whatever remains of the ruling party’s political capital. Party workers, especially those who’re having second thoughts about supporting the government on these bills because of the heat they’re facing from their constituencies just as they’re preparing their campaigns for the next election, will not count this as a win at all. And even if the PM can manage all this without relying on forces that he’s been accused of relying on since before his election victory, it will still be a Pyrrhic victory.

Copyright Business Recorder, 2021