Will Pakistan walk IMF talk?

The IMF dossier says it all. It is time for Pakistan to bite the bullet and embrace the painful economic reform that cannot be put off any longer. Prime Minister Shehbaz Sharif is obviously convinced there is no way out. This cannot wait another year, nor indeed another month – or why would the PM sign up to it right ahead of a difficult general election. It must start now and be followed to a T. While the sensational section of the media will flash headlines speaking of tough conditions imposed on Pakistan and compromised sovereignty, the reality is quite something else. The Fund is underwriting Pakistan’s bid for recovery from a major foul up by direct liquidity injections as well as access to international financial markets. This support is based on a clear understanding that Pakistan is prepared to exert every ounce of its resources to walk the difficult walk – and the roadmap for the programme has been designed to incentivize compliance with a set of pre-agreed goals and targets no matter who is in power. Those who have a problem with this arrangement are welcome to come up with a better alternative, but until then they would better keep their peace.

Even as he is on his way out, PM Sharif has a duty to present this arrangement in the proper light and win broad-based institutional and popular support for its implementation. And while Sharif and his cabinet colleagues spearheaded the effort to institute the programme, it could not have been concluded without active support from the bureaucracy, which should now share the responsibility to correct the more common misconceptions about its nature and design. Only then can the state and nation embrace the programme and carry it through the coming transition, emerging at the other end in better if not in good economic health. The need of the hour is to turn each challenge posed by the programme into an opportunity. The liberalization of the currency and a close coupling of the interbank and kerb markets, for instance, can be converted into an opportunity to stamp out grey transactions. The economy has a lot to gain by denying oxygen to hawala and hundi channels. The same money flowing through banking channels can do wonders for the country’s ailing economy.

The curbs on exemptions are Pakistan’s opportunity to persuade the rent-seeking classes that the days when they could consider the national exchequer spoils are over. Nor can the state allow money laundering in the guise of tax amnesty schemes. This denial of easy pickings is open to transmutation into a sharper focus on expanding the tax net, which is probably the most important item on Pakistan’s agenda anyway. The IMF's apparent insistence on tighter and tighter monetary policy going forward even as global inflation has started to recede and central banks worldwide are preparing to uncoil the monetary tightening executed over the last couple of years comes off as a bit harsh. However, a descent into high inflation or elevated inflationary expectations is the last thing Pakistan needs at this juncture, and the authorities may want to focus on administrative measures to take the edge off price inflation.

It is well known that a lot of today’s retail inflation is driven by greed. Unscrupulous elements among the trading class have turned the environment created by imported and fuel-based inflation into a price-gouging opportunity. Manipulators are in particular focusing on staple food items like wheat flour, rice, sugar, and pulses to mercilessly fleece the citizenry. A little administrative diligence here and there can go a long way towards curbing hoarding and profiteering, which hurt the vulnerable sections of society most. Food is a major component of the CPI basket, and the poorest of the poor in our country spend most of what they earn on food. The long and short of it is that now is no time to flinch in the face of hardship for the government and people of Pakistan, because this way lies salvation.