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Monday January 30, 2023

No concessions

October 30, 2022

We owe $55 billion to multilateral organizations. The IMF is in no mood for any concessions. The IMF wants fiscal consolidation. The World Bank is in no mood for any concessions. The IMF and the World Bank both want energy sector reforms. Between 1951 and 2011, the US sent in $67 billion. The US withdrew the last of its troops from Afghanistan in August 2021. We are a ‘front line state’ no more. We are a ‘major non-Nato ally’ no more.

We need at least $34 billion just to keep our country afloat for the next 12 months. We need to reschedule $27 billion worth of our bilateral debt. We need to ‘repurpose’ our multilateral loans. We need financing from the IMF’s ‘food shock window’. We need dollars from the Global Climate Fund, the Green Climate Fund, the Global Environment Facility and the Forest Carbon Partnership Facility of the World Bank.

The IMF wants fiscal consolidation. That means a revenue mobilization strategy and the broadening of the tax base. The IMF also wants a ‘flexible market-determined exchange rate’ and a ‘tight monetary policy’. Almost all our multilateral lending institutions want energy sector reforms. That means two things: eliminating losses, depoliticizing ‘gas and power tariff setting and adjusting tariffs to cost recovery’.

There’s a bloodbath going on in our energy sector. In 2018, when the PTI formed the government, circular debt stood at Rs1.1 trillion. It has now crossed Rs2.6 trillion and is projected to hit Rs5 trillion by 2025. We must move from a ‘single buyer model’, where the government is the only buyer, to a ‘multiple-buyer-multiple-seller-model’. Red alert: The power sector will make or break Pakistan’s economy – and the circular debt will definitely break the power sector. There are no more concessions out there. We must put our house in order.

There’s a bloodbath going on inside what we euphemistically refer to as Public Sector Enterprises (PSEs). This year the government will dole out Rs1.2 trillion in ‘grants’. This year the government will dole out Rs664 billion in ‘subsidies’. PSE domestic debt is at Rs1.4 trillion. PSE external debt is at Rs1 trillion. Let us put our house in order. Privatize.

The ‘Commodity Operations Debt’ is now Rs1 trillion. The government’s wheat policy has been a complete failure. The government’s sugar policy has been a complete failure. The ‘procurement price model’ has been a complete failure. Let us disband the Pakistan Agricultural Storage & Services Corporation Limited (PASSCO) – and save Rs200 billion a year. Let us embrace the World Bank supported ‘Strengthening Markets for Agriculture and Rural Transformation (SMART) programme. There are no more concessions out there. Let us put our house in order.

Our government wants to win the next election. Our government wants concessions. Our government wants to dole out subsidies. The world is in a mood to give us more concessions. They all want us to put our house in order. There’s donor fatigue and there’s lender fatigue. We are in no mood to put our house in order. We want more concessions.

We are in no mood to bring down our deficits. The deficits mean a severe economic crisis in the waiting. A prolonged economic crisis almost always turns into two things: a political crisis and eventually a humanitarian crisis. Take a pick: a humanitarian crisis or putting our house in order.

The writer is a columnist based in Islamabad. He tweets @saleemfarrukh and can be reached at: farrukh15@hotmail.com

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