Economic concerns

The International Monetary Fund (IMF) released its Post Programme Monitoring report last week, an analysis of the Pakistani economy some of which had been shared earlier. Much of the concerns have been raised locally before. So it is not a surprise that the IMF has chosen to highlight Pakistan’s weakening position in terms of its foreign currency reserves. The big number shared by the IMF is the negative $0.724 billion for Pakistan’s foreign currency reserves; the government has been claiming that Pakistan’s reserves stand at over $12 billion. If Pakistan’s foreign exchange reserves are indeed negative, then the crisis point has arrived earlier that most expected. According to the IMF, Pakistan’s reserves fell from around $7.5 billion to negative. The risks of a negative foreign currency balance for the country is likely to mean the need for more borrowing – even if the government does not go to the IMF for another bailout. In response, the federal government arranged a press conference in which Advisor to the PM on Economy Miftah Ismail put the difference down to a different methodology.

Former finance Minister Ishaq Dar had promised that there would be no returning to the begging bowl for Pakistan, and the government had said that the country’s macroeconomic position had stabilised. At the time, this claim had been questioned by many; it now seems they had a point. The deficit problem was one of the key issues that was not being addressed. It is not an easy one to deal with either, especially in a short-term context. But the IMF too can be accused of short-termism. The report claims that all the ‘gains’ of the Fund’s emergency funding programme were already being lost. But this only calls to question whether there had been any real change in Pakistan’s macroeconomic position when the IMF was lavishing praise on it only a year ago. There has been no fundamental change in economic policy since a year in Pakistan. Whatever was working a year ago should be working now if it was ever a viable strategy. The real trouble is that whatever be the claims, policies have been made under IMF conditionalities. International debt is a fundamental tool to influence government policy and Pakistan will need to move seriously to recover economic sovereignty. Any country in a weak fiscal position eventually finds it hard to decide its own economic future.