The Executive Board of the International Monetary Fund (IMF) last week approved the second tranche of $452.4 million after completing first review of the 6 billion dollars Extended Fund Facility (EFF) programme.
The Executive Board of the International Monetary Fund (IMF) last week approved the second tranche of $452.4 million after completing first review of the 6 billion dollars Extended Fund Facility (EFF) programme.
The statement issued by the First Deputy Managing Director and Acting Chair of the Fund, David Lipton threw his weight behind the economic policies of the government and said the economic reform programme is on track.
“Decisive policy implementation by the Pakistani authorities is helping to preserve economic stability aimed to put the economy on the path of sustainable growth,” Lipton said.
Moreover, he said the government decision to let the currency rate decided by the market forces was orderly and the inflation has started to stabilise which (would) hopefully reduce impact on the vulnerable sections of the Pakistani society.
He noted, “The government authorities remain committed to expanding the social safety nets, reducing poverty and narrowing the gender gap”.
But the IMF official cautioned against any complacency and said the economy was not yet fully out of the woods.
“….risks remain elevated. Strong ownership and steadfast reform implementation are critical to entrench macroeconomic stability and support robust and balanced growth,” Lipton added.
“The authorities are committed to sustaining the progress on fiscal adjustment to place debt on a downward path,” he maintained.
The planned reforms, he said, included strengthening tax revenue mobilisation, including the elimination of tax exemptions and loopholes, and prudent expenditure policies.
“Preparations for a comprehensive tax policy reform should start early to ensure timely implementation.”
The IMF support must generate a strong atmosphere of goodwill for Pakistan among the international financial institutions, which should now work closely with the country for its social development and the developed countries should also encourage their private sector to make investments in it.
It is a big challenge for the government to capitalise on this goodwill and turn Pakistan into a favorite destination for the foreign private investment.
In order to achieve this objective, the IMF statement did mention on some steps Pakistan needed to take on urgent basis.
Pakistan has been on the grey list of the Paris-based Financial Action Task Force (FATF) regarding countries which lack in measures to curb terror financing and money laundering.
The placement on the so-called list does not directly entail any financial repercussions but it could make foreign investors think twice before putting their money in Pakistan.
“Faster progress is needed to improve the AML/CFT (anti-money laundering and countering financing of terrorism) framework, supported by technical assistance from the IMF and other capacity development providers. Swift adoption of all the necessary measures is needed to exit the FATF’s list of jurisdictions with AML/CFT deficiencies,” the IMF vice president said.
Over the past 15 months, the government has contained the current account deficit by suppressing imports but it has conversely also affected the economic growth in the country, which has led to unemployment and joblessness.
The government has to take immediate measures to create job opportunities, which would help it in tackling the rising inflation.
Moreover, the exports have not increased proportional to the devaluation of the currency. Therefore, the government needs to review its export policy and take measures to ensure sharp increase in exports of the country that would not only earn much-needed foreign exchange but would also create jobs for the youth.
While handling the economy, the government also faces challenges on political, security, and foreign policy front.
Such a challenge became evident from the reported statement of Turkish President Tayyip Erdogan who told his country’s media that Pakistan pulled out the conference of leaders of the major Muslim nations hosted by Malaysian Prime Minister Mahatir Mohammad under the pressure of Saudi Arabia.
Erdogan is reported to have said that Riyadh threatened to withdraw its financial support for Pakistan and even replace Pakistani manpower with that of Bangladesh if did not reverse the decision to attend the summit, which it sees as a counterweight to the Organization of Islamic Conference led by it.
Though the Saudi Embassy in Islamabad denied the reports that it pressurised Pakistan and maintained that the relations between the two countries are based on solid foundations and Pakistani foreign office also has said that it stayed away from the summit to patch up differences among Muslim countries but Prime Minister Imran Khan’s decision to pull out of the summit at the eleventh hour has become a topic of an intense debate in local and international media.
It has also exposed Pakistan’s vulnerabilities owing to its fragile economic situation.
Such a precarious situation needs Pakistan to act very prudently which on the one hand should not hurt its vital economic interests and on the other should also not compromise its self-esteem.
Moreover, the government should also make efforts to bring political temperatures down on the domestic front.
The Supreme Court has mandated the government six months to pass legislation through the parliament laying down parameters with regard to the tenure of the army chief.
A special court verdict handing down death penalty on the former military ruler General (retired) Pervez Musharraf has complicated the matters for the government particularly for the Prime Minister.
The government is needed to carve out a smart strategy that should enable it to overcome these challenges without disturbing the continuity of the political process in the country.
The government earlier this year had coined the idea of a grand dialogue among all stakeholders of the state in the wake of serious challenges faced by the country but on the ground has not taken any step in this regard.
The time seems to have come for the government to think and act maturely and avoid steps that aggravate the situation because economy would be the first victim to any political turmoil or crisis in the country.
The opposition political parties should also behave responsibly and fully extend their cooperation to the government in resolving the major challenges confronted by the country.
Pakistan can ill-afford any new adventurism and it is incumbent on all stakeholders to act prudently otherwise the country would drift into another era of uncertainty and instability.
The writer is a senior journalist based in Islamabad
