Bailout plans

Is an IMF bailout part of the PTI government’s economic plan or not? After having to face a barrage of IMF commandments, Finance Minister Asad Umar put up a brave face in front of parliament and said that the government would not succumb to pressure to sign an IMF package against the interests of Pakistan. After a two-week long courtship during which the government attempted to show the IMF that it can be a model debtor, it is hard to take the finance minister’s insistence that the IMF can wait. Since the PTI took over, it has hiked gas and petrol prices, depreciated the Pakistani rupee, slashed the development budget and pushed forward a number of structural adjustments. The measures seem more like moves to indicate to the IMF that Pakistan is malleable to its dictates – even before an agreement is on the table. There are two options on how to interpret the finance minister words in parliament: either the statement was purely political or the IMF has overplayed its hand and made one demand too many.

With the PTI taking power in the centre, the hope was that it could start a different economic path from the one that has traditionally been favoured by our governments. Like the last government, the current one too has needed to secure external funding to finance the trade deficit. One key difference is how much noise is being generated around it. In principle, the government has only managed to confirm a loan from Saudi Arabia, while failing to tell us what has been offered in return. The finance minister has claimed a 15 percent increase in remittances since the PTI government took charge, which if confirmed as a positive trend could offset the need for a significant bailout.

The trouble is that we have seen confusing declarations in the first three months of the government. On the eve of talks with the IMF, the finance minister had declared that Pakistan no longer needed external funding. This is not true. Plus, the question is not if Pakistan needs external funding, but how it will cover the gap. What is most important is for the government to chart out its own idea of economic policymaking for Pakistan. In the last meeting of the Economic Advisory Council, there was talk of developing a Plan B if the IMF deal does not go ahead. That is good, but the question is whether this should not have been Plan A to start with.