After a lot of dithering and apparent reluctance, the Pakistan Tehreek-e-Insaf- (PTI) led government is all set to sign a bailout package with the International Monetary Fund (IMF).
Before the talks with the IMF were opened for the deal, the government succeeded in raising enough financial assistance from the friendly countries – notably Saudi Arabia, the United Arab Emirates and China – to ward off an imminent balance of payment crisis.
According to the finance minister Asad Umar the steps taken by the PTI government in its eight month rule the ailing economy was shifted from the intensive care unit to the normal ward meaning that it is no longer in crisis mode and now the stabilisation process has started which may take up to three years for the economy to fully recover.
Even if one agrees with the finance minister’s interpretation, this honeymoon period for the economy could soon be over if a tough and painful home-grown structural reforms are not undertaken.
Three back-to-back comments by the Asian Development Bank (ADB), the World Bank, and the IMF endorsed this point of view recently.
The ADB in its report earlier this month warned that Pakistan’s GDP could decelerate to 3.9 percent in the ongoing fiscal year despite efforts to tighten twin deficits and monetary policies.
The World Bank painted an even bleaker picture in its report stating that the GDP could decelerate from the 11-year high of 5.8 in fiscal year 2018 to 3.4 percent in 2019 and could slip to 2.7 percent in the fiscal year 2020.
The IMF projected the average growth in the range of 2.4 percent in the next five years in case it does not enter into a deal with it.
Now when the finance minister is announcing that the deal with the IMF is around the corner, much depends on his reform agenda aimed at taking the country out of the present economic abyss.
Umar has identified the fiscal deficit, current account deficit and saving-investment gap as the three main challenges for Pakistan.
So far, the government has not taken any innovative steps to address these issues and have relied heavily on the same old measures practised by the successive governments in the similar situations.
Facing a revenue shortfall of nearly Rs480 billion in the current fiscal year, the government has increases utility prices to make up for some of the losses but it led to higher inflation.
The launch of another tax amnesty scheme – which the PTI government had vehemently opposed while it was in the opposition – is another desperate effort by the government to raise badly-needed funds to fill the revenue gap.
The government has succeeded in curtailing current account deficit by controlling imports but the real difference could only come if it succeeds in causing a remarkable increase in the exports.
Despite massive depreciation of the rupee value and lucrative financial packages for the export industry, the exports have not shown any substantial increase – a fact acknowledged by Prime Minister’s advisor on trade Abul Razzak Dawood.
He expressed the hope that Pakistan’s effort to seek wider access to the major international markets like Europe and China would result in significant increase in exports in coming years that would ultimately bring down the current account deficit. While one hopes it to happen but so far it is nothing more than a feel-good story.
The government is touting Pakistan as a safe haven for private investment and Prime Minister Imran Khan is personally joining efforts to promote tourism – particularly religious tourism – in the country.
The move would not only project Pakistan soft image in the world but would also be a big source of the much-needed foreign exchange.
Peace and improved security situation is vital for luring foreign tourists to the country. The security situation in Pakistan has undoubtedly improved significantly, thanks to the successful military operations against terrorists in the erstwhile tribal areas bordering Afghanistan, but terrorist incidents like the attack targeting ethnic Hazara community in Quetta is a stark reminder that Pakistan’s long drawn out war on terrorism is yet not over.
Moreover, the threat of Pakistan’s getting blacklisted of the Paris-based Financial Action Task Force for the countries that fail to take requisite measures to stop funding for militant groups and money laundering is a major challenge for the policymakers to convince the international community about its efforts in this regard.
All these issues are closely interlinked and these could not be addressed by inconsistent actions.
Pakistan needs a holistic and an all-encompassing policy, to be firmed up with the input and participation of all stakeholders, to address these issues in a comprehensive and concrete manner.
An inordinate delay in framing such a comprehensive policy framework has led the country to suffer at all fronts but any further delay by the stakeholders could aggravate the situation.
The government needs to tone down political rhetoric and try to mobilise all political forces on the need for framing such a policy framework.
Time is fast running out. The country has to submit its report on actions needed to get itself off the so-called grey list of FATF. The FATF would respond to the report by the mid-May while any action in this regard would become effective by May.
Such a situation warrants a serious and sombre attitude from the government.
The government needs to reach out to the opposition parties, particularly those represented in the parliament, to evolve a broad consensus on ways to resolve such issues.
The present government could never be blamed solely for the current state of affairs but being at the helm it is their responsibility to lead the way towards resolving these matters.
However, just blaming predecessors for all the wrongs would not resolve the problems of the facing the country and the government now has to draw up a strategy to address these problems in a serious manner. This is the only way to found a “Naya (new) Pakistan”.
The writer is a senior journalist based in Islamabad