It must be good news for Pakistan’s economy managers that the International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on policies and reforms that the country needed to complete the sixth review. Whether this news is also good for the citizens of Pakistan is yet to be seen. The sixth review under the six-billion-dollar extended fund facility was pending since April this year. The recently concluded staff-level agreement is yet to get approval by the IMF executive board. This approval is not likely to materialise before Pakistan implements all required conditions which now come as ‘prior actions’ as a euphemism. Such actions included fiscal and institutional reforms that will have far-reaching ramifications for the country’s economy and its financial management.
Funding from bilateral and multilateral partners to a great extent depends on the release of the next tranche from the IMF that would bring the total disbursement under the programme to over three billion dollars. It is worth recalling that special drawing rights comprise a basket of mixed currencies that member countries make available to the IMF. Pakistan has been facing an extremely difficult economic environment since 2018 and there appears to be no end to more borrowing from various sources. In this matter certain quantitative performance criteria play a significant role as any inability to meet them puts the economy under further strain. Perhaps the most noticeable is the primary budget deficit that the IMF is always concerned about. That is the reason the IMF asked for the finalisation of the National Socio-economic Registry (NSER) update and adaptation of amendments to the National Electric Power Regulatory Authority Act.
Related to this is also the notification of all pending quarterly power tariff adjustments and payments of the first tranche of outstanding arrears to independent power producers (IPPs). In all this rigmarole, the common consumer of the country does not feature at all. These are all targets on the structural front and do not consider the problems of the people of Pakistan. Though Pakistan appears to have made some progress on the front of anti-money laundering and combating the financing of terrorism, the FATF has been reluctant to remove the country from its grey list. The IMF also considers these issues and has raised concerns about the additional time Pakistan needs to strengthen its effectiveness. If Pakistan manages to improve its tax collection revenue by the FBR, the economy may rebound but the real issue is the financial hardships the people of this country have been facing. Ultimately the IMF deal will be as good it gets for the common citizens.