Bail-in and bailout

The PTI government seems to be still in a bind despite formally requesting the IMF for a bailout package. The government faced scathing criticism from the opposition for its delayed decision to go for the inevitable to avert the imminent balance of payment crisis.

Everyone thought that after Finance Minister Asad Umar made formal request to the IMF chief Christine Lagarde in Bali, Indonesia, the government will sit down to draw up a strategy for the talks with the IMF team due in the country in early next month.

However, a shocking statement came from no less a person than Prime Minister Imran Khan himself hinting that a second thought is emerging in the government circles.

Speaking to newspaper editors, the prime minister revealed that the government may still not need a bailout package from the international lending agency to overcome the impending crisis.

Khan said he has still not lost hopes on friendly countries to help Pakistan to get out of the crisis.

The Prime Minister made the remarks against the backdrop of his upcoming visit to China due next month which was immediately followed by reports that the PM would also be visiting Saudi Arabia this week.

Though the government officials insist that this week visit to Saudi Arabia, the second trip to the Kingdom inside a month, is primarily aimed at attending the Future Investment Initiative Summit being hosted by the Saudi monarch, observers say the prime minister is expected to impress upon his hosts for a financial assistance.

The government expects that it could easily avoid going to the IMF if the two countries commit financial support up to $6 billion.

The prime minister’s remarks generated a new debate in the national media with questions being asked that what made him to change his mind within few days of extending request to the IMF.

Many people think that the prospect of IMF putting tough conditions for disbursing the loan that could cause public unrest might be the reason for the government to reconsider its options.

But critics say, there is no such thing as free lunch in other options too.

Traditionally the Chinese loans have been very expensive while there could be many political implications for getting financial assistance from Saudi Arabia, particularly at the time when the Kingdom is facing tremendous international pressure over the recent killing of dissident Saudi journalist Jamal Khashoggi in Turkey.

In such situation, the PTI government should take a well thought out and firm decision and should not be seen flip-flopping on key issues.

Observers say there is no easy going and the government has to take tough measures to stem the slid in the economy no matter whichever option it opts for.

However, many experts believe that Pakistan’s going to IMF has become a foregone conclusion.

They say instead of sowing more confusion, it is better for the government to concentrate on its homework to prepare for the talks with the IMF teams.

Moreover, they say that even government is interested to further explore other options then it should keep doing it but should avoid discussing such matters in public before a significant progress is made in this regard or they get mature.

Though it is unfair to blame the two-month old government for the current economic woes faced by the country, it should take the blame for its failure to make crucial decision with regard to economy during its two month rule.

The government leaders, particularly the prime minister, are well advised to keep in mind that they are no longer in opposition and therefore, they should show utmost prudence and care while giving statements, particularly on economy.

If the recent reaction of the stock and money markets on government’s indecisiveness on how to ward off balance of payment crisis is any guide, then the government leaders should show more maturity in dealing with such situations.

However, some economic experts believe that the current government from the day one had made up its mind to invoke IMF option but was hesitant to accept it publicly for political reasons.

“They had started implementing the IMF agenda before they formally go to the IMF,” senior economist Dr. Shahid Hasan Siddiqui said.

“Cut in development funds to achieve stabilization before growth, raising of interest rates, depreciation of the rupee etc have been the long-running demands of the IMF and these steps have been taken before they went to the IMF.”

Siddiqui said it is a foregone conclusion that the help from China and Saudi Arabia could not be a substitute for the IMF option.

“You may get oil on deferred payment. You may get something from China but you have to ultimately go to the IMF and you are going to it,” Siddiqui added.

He said the government’s claim of raising foreign remittances from the overseas Pakistanis, crackdown on money laundering, promise of increasing foreign investment would take up to two to three years to materialize but it immediately needs hard cash to meet imminent challenges which could not be tackled without going to the IMF.

In view of this situation, the government needs to put together a robust strategy to deal with these challenges effectively and seriously.

If government wants to address economic challenges effectively then it should bring political temperatures down.

Corruption is undoubtedly a major concern in Pakistan and it must be clamped down stringently but this crackdown must not only be across the board but it should not be seen as a political witch-hunt as happened in the past.

It must not relent on its anti-corruption campaign but it must take measures to ensure that it is not a political victimization drive aimed at settling scores with its opponents and it should be seen as a genuine effort to bring corrupt people to book.

The government has full mandate to scrutinize all economic and energy deals struck during the previous governments but it needs to review them in a professional manner and its leaders should avoid creating hue and cry in media unless some wrongdoings are found as such practices vitiate political as well as economic environment of the country.

The writer is a senior journalist based in Islamabad