KARACHI: As Pakistan's parliament was dissolved late Wednesday night, leading Pakistani economic experts criticized the outgoing government of Prime Minister Shehbaz Sharif, blaming a delay in reaching a bailout agreement with the International Monetary Fund (IMF) as being a “complete disaster” that caused wide-ranging damage to the country’s economy, Arab News reported on Thursday.
The $3 billion IMF deal, a lifeline for Pakistan after it was on the cusp of default, came after eight months of tough negotiations over fiscal discipline. Before that, cash-strapped Pakistan's $350 billion economy had been in meltdown for months, with inflation reaching record levels in April and May. A rapidly depreciating currency and external deficit led the government to adopt drastic measures over the past year to avoid default.
As part of the IMF deal, Islamabad has committed to a petroleum levy of up to 50 rupees a liter, alongside a string of painful measures, including raising extra revenues, increasing energy prices and a market-based exchange rate, which has already fueled inflation. Devastating floods last year that killed over 1,700 people in Pakistan were another major blow, as critical infrastructure was swept away and thousands of acres of agricultural land destroyed, causing estimated losses of about $30 billion to the economy.
Dr. Vaqar Ahmed, Joint Executive Director at the Sustainable Development Policy Institute (SDPI), said the government’s inability to sign a timely deal with the IMF had been damaging to the economy.
"During [Finance Minister Ishaq] Dar’s tenure, particularly three areas, energy prices, exchange rate, tax exemptions and also tax rates remained under the observations of IMF and conditions related to these areas became more stringent,” Ahmed told Arab News.
Economist Ammar Habib Khan described the Sharif government’s regime as a “complete disaster.” “It was a complete disaster, failures are more and there is no success,” Khan said. “If you keep delaying something and finally do it, this is not a success, because it has resulted in huge losses.”
During the 16-month-long tenure of the Sharif government inflation, dollar-rupee parity and overall industrial production all became worse instead of improving, Khan said: “This was not a good time at all.”
Uzair Younus, director of the Pakistan Initiative at the Washington-based Atlantic Council, also lamented the delay in signing the IMF deal, saying recovering from the “trauma inflicted on millions of citizens will take years, if not decades.”
Financial expert Khurram Schehzad said the success of the Sharif government was “getting the IMF program back on track and its failure was the delayed decision.”
If the government had taken a timely decision to implement IMF prior conditions including energy prices adjustments, the economy would not have suffered as much, he said.
However, he credited the outgoing government for establishing the Special Investment Facilitation Council (SIFC), a top-level government forum, with a key role of the military, to attract international investment in sectors such as mining and agriculture.
Schehzad said the initiative had brought all stakeholders in Pakistan together on a “single platform,” and highlighted the Pakistani sectors ripe for international investment.
Other successes of the Sharif government include a 16% growth in tax collection, a decline in the primary deficit and current account deficit, a narrowing of the trade deficit by 38%, a 5.4% growth in wheat production, and high performance of the country’s stock market. Foreign exchange reserves also rose to $14 billion, including $8.6 billion reserves held by the central bank.
The outgoing government of PM Sharif has set an economic growth target of 3.5% for fiscal year 2024, as compared to 0.29% the previous year, to be achieved through various measures like the Kissan package for flood-hit farmers, industrial support, export promotion, encouragement of the IT sector, and revenue mobilization.