EDITORIAL: Prime Minister Shehbaz Sharif in a short statement shared by the Media Wing of the Prime Minister’s Office, echoed the sentiments of Finance Minister Ishaq Dar, by placing the onus of creating hurdles in the revival of the International Monetary Fund programme on Imran Khan.
This is extremely unfortunate as it not only fails to place responsibility where it squarely and unequivocally lies, a precondition for removal of all remaining impediments, but also fails to provide any political capital to the Prime Minister or his party by strengthening a political discourse that is simply not plausible.
While each mandatory quarterly review during the entire duration of an IMF programme is not standalone as it may necessitate extending waivers of agreed time-bound conditions and structural reforms; however, it stands to reason that the success of the last review wipes the slate clean and any delays in a subsequent review are the outcome of foot-dragging and/or violating the spirit of the agreements in the last review and/or the programme itself.
The last IMF review is dated August 2022 and was signed off by the then Finance Minister, Miftah Ismail, and the then Acting Governor of the State Bank of Pakistan (SBP), Murtaza Syed, in which the two men pledged to: (i) slash all subsidies that were untargeted, including electricity subsidy to exporters; and (ii) to continue with a market-based exchange rate.
Ishaq Dar took over as finance minister end-September and on 6 October announced the continuation of the electricity subsidy to exporters and by the end of October a farm package that envisaged cheaper inputs and credit to farmers without any safeguards in place to ensure that only the subsistence level farmers or those negatively impacted by the devastating floods would be the beneficiaries of the taxpayers’ largesse.
In addition, in spite of the autonomy granted to the SBP by parliament in January 2022, Dar reportedly pressured and/or supported the SBP to control the interbank rupee-dollar parity that led to the emergence of a grey market and a significant decline in remittance inflows through official channels.
And, what is simply baffling is that while the rupee was put back on a market-based exchange rate system on 26 January, a prior condition of the IMF team for the start of talks on the ninth review, yet by mid-February 2023 the economic team leaders had again abandoned the market-based exchange, which was the cause of a further delay.
And what should be a further source of serious concern is the failure of the economic team leaders to think out of the box either in terms of sectoral policies or undertaking reforms with macroeconomic implications, particularly slashing major recipients of current expenditure that include defence, civil administration and pension reforms.
These reductions, in turn, would reduce dependence on borrowing externally and domestically with a consequent decline in the budget requirements for mark-up and payment of principal as and when due.
The austerity plan announced by the government is unlikely to make any serious dent in expenditure. It is a sad reflection on the country’s economic team leaders that instead of reducing outlay to contain the budget deficit (a highly inflationary policy) they seem to have done the opposite as it has risen from 1.37 trillion rupees July-December 2021-22 to 1.68 trillion rupees in the comparable period of 2022-23 – or a rise of nearly 23 percent.
And this is in spite of the usual flawed policy to create space through a decline in Public Sector Development Programme – from 288 billion rupees July-December 2021-22 to 162 billion rupees in the comparable period of 2022-23 – or a decline of nearly 44 percent with implications on the growth rate and job opportunities.
Reports indicate that the delay in the ninth review is reportedly due to failure of some of the friendly countries to confirm rollovers or disburse additional loans previously agreed with some reports indicating that loans have been replaced with offers of investment that require more time to disburse.
Unfortunately, one can only speculate on the reasons behind the delay in the review or on statements by government ministers/officials with an obvious political bias that can only be confirmed once the ninth review has been declared a success by the Fund followed by uploading of the relevant detailed documents on the Fund website.
Till such a time one can only hope that Cabinet members desist from making statements that are no longer finding any traction within non-partisan members of the public.
Copyright Business Recorder, 2023
Comments
Comments are closed.