Turning to the International Monetary Fund (IMF) for a bailout package to avert an imminent balance of payment crisis seems to have become inevitable.
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Turning to the International Monetary Fund (IMF) for a bailout package to avert an imminent balance of payment crisis seems to have become inevitable.
As soon as the new government assumes power after July 25 vote, the first thing it has to do is to explore ways to tackle balance of payment crisis.
According to experts, Pakistan – which has just a little over $9.5 billion in forex reserves – needs $25 billion alone in the current fiscal year in debt repayment.
The country has received $4 billion dollars only in this year from the Chinese bank in an effort to defer the financial crunch in debt repayment but it could no longer continue with the same policy.
But the main question is how easy or difficult it would be for Pakistan to secure a deal with the international lender with favorable conditions.
Pakistan’s current economic situation and geostrategic developments in the region and the world at large indicate that Pakistani economic managers are in for a hard bargain with the global lenders.
While negotiating the deal, the IMF is all expected to ask Pakistan to take measures to contain the yawning twin deficits.
It might ask for further devaluation of the rupee in a bid to boost exports to contain current account deficit but this may lead to high inflation, triggering a possible public backlash.
For a newly-formed government, which many believe would be a coalition, taking his risk would be a big challenge.
Moreover, Pakistan might be asked to revive its stalled privatisation process and in the absence of a national consensus this too would be a major challenge for a coalition government.
The geostrategic situation might play a major role in the finalisation of the IMF deal.
The killing of Tehrik-i-Taliban Pakistan (TTP) chief Mullah Fazlullah by the US drone raised hope for a reduction of mistrust in the bilateral ties, but relations between the two countries continue to remain strained.
The placement of Pakistan, at the behest of the United States, on the grey list of the Financial Action Task Force (FATF) consisting of countries, which have deficiencies in controlling money-laundering shows a great deal of mistrust still exists between the two countries.
The most significant challenge for Pakistan while negotiating a deal with the IMF would be matters related to the China-Pakistan Economic Corridor (CPEC).
There have been apprehensions in the official circles that the CPEC agreements might come under scrutiny in Pakistan-IMF talks.
Despite adamantly claiming transparency, the previous government, which negotiated the CPEC agreements, was alleged by some experts as well as the then opposition of resisting calls to make those deals public.
It is feared that the IMF might ask Pakistan to shelve some projects under the CPEC before approving any bailout package.
Such a situation might put Pakistan in a tight spot.
Unfortunately, it appears that none of the main political parties has done any homework in this regard and whosoever comes into power has to rely heavily on the finance ministry’s baboos to prepare a plan of action for them.
The proposed course of action is not expected to be any different from what has been done in the past though in practically one would have expected bold and innovative initiatives by the leaders to deal with this challenging situation.
Ideally, the first and the foremost duty of the rulers of Pakistan should be to honestly lay the economic situation of the country bare before the people and then mentally prepare them to brace for any tough measures to be taken to put it on the economy on the right track.
In the past, Pakistan has many times resorted to the IMF for bailout packages mostly to weather a temporary crisis but it has never used them to strengthen the economic fundamentals of the country.
The previous government, particularly its first finance minister Ishaq Dar, juggled most of the time with the figures to show off his efficiency but gave little attention to the major challenges facing the economy.
His entire focus was on achieving high growth but he conveniently ignored the main problems afflicting the economy like foreign debt, twin deficits, etc.
At the fag end of its tenure, the Pakistan Muslim League-Nawaz (PML-N) government tried to boost exports by devaluing the local currency but failed to address the real problems weighing down on the exports.
It is heartening to see that despite all challenges the political and democratic process has continued uninterrupted for the past ten years or so but it is time for our political leadership to set its priorities right.
Political stability and economic sovereignty are a must for any country to live with respect and independence.
Without toning down its rhetoric, the leadership should now seriously concentrate its efforts to deal with the real challenges faced by the country.
According to a recent report of the United Nations Development Fund, Pakistan currently has the largest generation of young people ever recorded in its history.
The report says 64 percent of the total population of the country is below the age of 30 while 29 percent is between the ages of 15-29 years.
“It is currently one of the youngest countries in the world and the second youngest in the South Asian region after Afghanistan,” the report adds.
But this young generation needs to be provided with ample opportunities in employment, education, and other sectors so that their potential is positively exploited.
It is, therefore, vital for the rulers of the country to focus their energies to put economy on right track so that potential of talented youth is properly utilised.
The ‘Youth bulge’ provides a golden opportunity for the country to properly galvanise their potential for the progress and development of the nation but if failed to do so then country could face severe social and economic problems.
It is, therefore, right time, for the national leadership to rise to the occasion and deal with these matters seriously and solidly.
The writer is a senior journalist based in Islamabad
