Caretaker set-up likely to take some tough economic decisions

The caretaker government is expected to take some challenging economic decisions, which the present government has failed to take since 2008 due to political considerations. Sources said the caretaker set-up would have all the powers of an elected government and may take some challenging decisions to deal with massive problems created.
The job of an interim set-up would be difficult as it would deal with depleting foreign exchange reserves, unsustainable public debt, higher fiscal deficit than budgeted as well as problem of electricity and gas shedding. The government has failed to resolve the problem of circular debt and the entire allocation of budgetary subsidies for the current fiscal year were consumed in the first five months. The problem of loadshedding as well as other macroeconomic issues, if compounded till the start of the tenure of the caretaker set-up, may compel the caretakers to take some decisions that they do not have the mandate to take.
In reply to a question about a new International Monetary Fund (IMF) loan, an official, who requested anonymity, said that a programme loan was signed with the IMF by the caretaker government in 1988; however, there is a difference between then and now. Sources said the country is carrying a historical baggage of successive failure with the IMF and the Fund may not be eager to sign a programme either with the present set-up, or interim government unless nudged by the US.
They said that the caretaker set-up can be empowered to present the budget and added that more than 80 per cent budget is fixed and prepared by the bureaucracy and there is very little cushion for any government to change expenditure priorities. Political decision-making is required for about 10 to 15 per cent of the budget, he added. The coalition government's political success was overshadowed by the performance of economic team and may entail serious political consequences. Background interaction with ruling party's leaders and coalition partners reveal that there is a growing realisation of government failure on economic front.
Hafeez Sheikh recently claimed that the government had opened back door contacts with Pakistan Muslim League (N) for a possible arrangement with IMF; however background interaction revealed that Sheikh is not acceptable to opposition due to lingering doubts over his competence.