Geo ‘Great Debate’: Another IMF programme must to end economic crisis: experts

ISLAMABAD: Pakistan’s business tycoons and economic experts on Sunday suggested that the country will have to go for another International Monetary Fund (IMF) programme in order to fulfill its growing foreign debt repayment issues and other liabilities. There was a consensus among them that Pakistan will have to boost its exports, rationalise imports and jack up tax revenues to restrict the twin deficits, budget deficit and current account deficit. In a Great Debate telecast by Geo News and anchored by Shahzad Iqbal that continued for three hours, the panelists discussed the challenges and measures being taken by the Pakistan Democratic Movement-led (PDM) government to steer the country out of problems.

Lucky Cement CEO Ali Tabba stated that policymakers need to sit together to devise a strategy that the next IMF programme should be the last Fund programme, adding in the same breath it requires a roadmap to boost exports and restrict imports, which can be financed through non-debt creating inflows. He said he did not know what kind of options were available to generate dollar inflows from bilateral partners in case if there would be no IMF programme. He warned that there would be dire consequences of default as inflation, which stood at 38 percent now, might cross 70 percent. He also predicted a massive devaluation of rupee in case of default. Engro CEO Ghias Khan stated that the external debt-to-GDP ratio stood at around 400 percent and in those countries that faced default, this ratio was hovering around 350 percent. So the numbers were portraying a bleak picture.

He said if the IMF programme was not revived, there would be very limited options. Pakistan will have to go to its bilateral donors for securing loan restructuring, and in that case too, the country will require an IMF programme. He said the country will have to undertake energy reforms under long-term solutions. He stressed the need for focusing on sectors which are not energy intensive. Resource and Revenue Mobilisation Commission head Ashfaq Tola said there was a need to ascertain the reasons behind such a poor economic situation and reminded that Pakistan had successfully completed the IMF programme from 2013 to 2016. The economy, which stood at the 24th position, now had slid to 47th economy in the world. He said that there was purely speculation on the exchange rate front.

Economist and associate professor at LUMS Ali Hasnain, on the occasion, said that Pakistan’s size of economy in dollar terms stood at $300 billion and the country was struggling for securing $1 billion tranche from the IMF. He said that there was a need for long term plan focusing on exports. Former finance minister Miftah Ismail, who joined the debate via video link, said that in case of failure to revive the IMF programme, it would be difficult to avert a default. He said if the pending 9th Review of the IMF programme was not finalised and the government did not go into long term Standby Arrangement of the Fund programme, in the next fiscal it would become difficult to meet the obligations.

He said that Pakistan required external financing of $35 billion in the next financial year 2023-24 if the current account deficit was fixed at $9 billion. He added if the current account deficit was restricted at zero, even then the country required $25 billion in the next financial year for external debt servicing. He explained that if there was no IMF programme, Pakistan will not be able to get loans from the World Bank and Asian Development Bank. The former financial czar urged the federal government to stop making “plans A and B” and approach the global lender for the bailout package.

Topline Securities Chief Executive Muhammad Sohail stated that if there would be no IMF programme, Pakistan would default in the next 12 months. Alpha Beta Core chief Khurram Shahzad said that Pakistan is on the brink of default. The country did not have foreign exchange reserves and it would have to pay back huge external debt repayments. Pakistan could avoid the IMF but it required major reforms. Bank of Punjab President Zafar Masud was hopeful that the IMF programme would be revived before June 30, 2023. He said that Pakistan could avert a default keeping in view profiling of our external debt.

Businessman Arif Habib stated that he got an impression from recent meeting with the prime minister and finance minister that all three requirements of the IMF would be accomplished. But the question arose if the Fund programme could not be revived, then what would happen. The Arif Habib Group CEO said the government had written off the Roshan Digital Accounts in which $6 billion came. Its rates need to be revised upward, he added. He proposed to the government to announce a scheme for those overseas Pakistanis who could bring $200,000 to Pakistan and they should be offered real estate plots.