Beyond rock bottom

Slowly but surely, Islamabad and the IMF are inching closer to a deal over the much-delayed 9th review of the Extended Fund Facility (EFF), primary to the rejuvenation of the Fund’s stalled billion-dollar bailout programme for Pakistan. The coalition government has finally come around to the Fund’s point of view over the way forward and delivered on almost all the so-called ‘prior actions’. Beyond this point, the reinstatement of the EFF should be a matter of mere form, paving the way for the immediate release of an approximately $1 billion tranche of IMF funding. Even more important, the mending of fences with the Fund will also smooth the flow of bilateral and commercial financing to Pakistan, hopefully ending the current impasse that has seen the country’s forex reserves dwindle to mere weeks’ worth of the imports bill.

But the government must bear in mind that this is no occasion to declare victory in the unseemly blame game over the state of the economy that has been going on since last April. While former prime minister Imran Khan and his diehard party cadres will continue to push the line that his ouster led to the current economic meltdown, serious observers of the economy know well it is the outcome of his sojourn in power. The seeds of the current crisis had already been sown in 2018 and 2019 – and Imran’s staunch ally Sheikh Rasheed is on the record having said Pakistan was on course to default in 2020 were it not for the foreign assistance inflows enabled by the Covid-19 global pandemic. It is well known that Imran had to boot his blue-eyed boy and first finance minister Asad Umar in April 2019 precisely because his policies were inefficacious. Abdul Hafeez Sheikh could probably have done a better job of managing the economy but had to be let go after failing to secure a Senate seat mere months after he joined Imran’s cabinet. Imran’s last finance minister Shaukat Tarin was probably the only one of his string of economic czars who got to grips with the economy, negotiating the reinstatement of the IMF programme. He too is on the record saying just ahead of his appointment in December 2021 that he was inheriting a thoroughly wrecked economy. To his credit, Tarin admitted after Imran’s ouster that the PTI government had stacked up loans equal to 76 per cent of the total debt burden accumulated over the country’s history. Imran’s virtual mothballing of CPEC was in particular a kick in the gut for the country’s economy.

The drift is that there is plenty of evidence to the effect that the economy was in shambles long before the incumbent government took over. Imran chose to play the wrecking ball for the economy even after his ouster, projecting a political risk that the government has been unable to mitigate despite its best efforts. The devastating impact last year’s cataclysmic monsoon flooding had on the economy is not lost on anybody either. But all of that is beside the point. What today’s government needs to focus on instead is putting the economy on an even keel as soon as possible. It is time for Pakistan to chart a bold path to people-centric economic stabilization and forge ahead on that path at full throttle. Equally, it is the government’s duty to demonstrate to a people suffering under inflation that the worst is over – that the economy is through the rock bottom and things are on the mend. That, at the moment, is the only way for the ruling coalition to recoup some of its political capital lost defusing the mines laid by the previous government on its way out.