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December 6, 2018

Govt has no option but to go to IMF: economic experts


December 6, 2018

ISLAMABAD: Top economic experts are unanimous that the government has no option but to go to the IMF to avoid the balance of payment crisis. However, they disagree on some of economic policies of the government. Some expert see recent decisions of the government as the right step in the right direction. But some of them think these are short-term measures which cannot solve the economic woes in the long term.

According to them, though reduction in imports, expanding exports and revising the Foreign Trade Agreements (FTAs) with different countries are no doubt positive steps, these measures can bear fruit only when the government is serious about implementing them.

Renowned economic expert Qaisar Bengali believes the government has fulfilled the IMF preconditions but it lacks courage to tell the truth to the public. The government’s recent two steps i.e. rupee devaluation and increasing the interest rate by 1.5 percent are actually two major conditions of the IMF.

The government has implemented these two conditions before availing itself of the IMF programme so that they should not be made part of the agreement. These are short-term measures which cannot bring solution to our long-term economic problems, he said.

Former Secretary Finance Dr. Waqar Masood thinks the economic woes of the country are still there despite passage of more than three months.

“The indecision of the government to go to IMF is hurting the economy. Though reducing imports is a good step, it is imperative that the government should not impose a cut on the industrial imports,” he said. Abid Qayyum Sulehri, member of Prime Minister’s Economic Advisory Council, thinks the government is moving in the right direction.

The steps taken to resolve the crisis of balance of payments, including devaluation of rupee, reducing the imports and enhancing exports, no doubt are the right decisions. The government’s economic performance cannot be judged in three months. It should at least be given three more months before commenting on its performance, he said.

Syed Shabbar Zaidi, renowned economist, thinks the government has taken right decisions. The rupee devaluation was long overdue and this was the right time to take this decision.

“Our annual imports volume is around $61 billion and if this government manages to reduce it to $50 billion there will be no need of IMF in future,” commented Zaidi. He said there is no other solution to resolve the balance of payment crisis other than going to the IMF. The government needs to control the reverse remittances and reduce the trade deficit.

When asked whether revising the FTA with China will help Pakistan to reduce its imports and enhance exports, Dr Bengali said, “The FTAs have always cost Pakistan’s economy. We are not an industrialized country. We are an import based economy. When we cannot manufacture anything then why we always insist on FTAs revision. FTAs are one of the major reasons of our trade deficit. We have to revitalize our industry if we need to enhance the exports”.

He said the government lacks the courage to admit that it has already agreed to the IMF conditions. The rupee devaluation and increase in interest rate seems to be preconditions of IMF. The government is dodging the public as it has fulfilled these conditions before availing the IMF package, he commented.

Former Secretary Finance Dr Waqar Masood said the crisis of balance of payment is not resolved yet. “The only concrete thing we have witnessed so far is the Saudi government’s one billion dollar support to Pakistan. Despite passage of more than three months the government could not bring economic stability. Sooner or later we have to go to the IMF”.

“The fiscal deficit has already widen to 1.4 percent in first quarter whereas we have witnessed Rs70 billion shortfall in tax collection during the first quarter. The government should control the imports but there should be no reduction in the industrial imports”, commented the former finance secretary.

He said exports could not be increased fortnight as it will take years to yield the result. Any delay in availing IMF package will further damage the country’s economy as our reserve cannot last for long.

When contacted Dr Abid Suleri said the government has taken few steps to resolve the balance of payment which include rupee devaluation, reduction in imports and enhancing the export. “The government had to repay almost $1 billion by the end of September which has been successfully tackled. So the threat of being declared defaulter has been avoided”, commented Dr Suleri.

“Even if Pakistan does not avail the IMF package the rupee devaluation was long overdue. Pakistan is renegotiating the FTA with China which will benefit the country in future. These are all positive steps the government has taken so far. If the government implement all these steps in letter and spirit then I am sure country’s economy will improve”, said Dr Suleri.

Talking to The News Shabbar Zaidi said Pak rupee was overvalued and the government’s decision of rupee devaluation is the right step. Similarly the reduction in imports and enhancing the exports is also a right decision of the government.

“We can improve the balance of trade with China and the government’s decision or renegotiating the FTA will bear fruit for Pakistan’s economy. I don’t think there is any harm to go to IMF. It is the media which has always given negative coverage whenever any government decides to avail IMF. What is the harm if IMF ask the government to bring reforms in our economic sector,” said Mr Zaidi.

He said the government can easily reduce the imports from $61 billion to $50 billion. “We are importing even stationery items like pencils, pens. Why can’t we stop such imports and start manufacturing these things in Pakistan. Pakistan can easily reduce the imports by up to $10 billion annually and then we will need no IMF packages in future,” commented Zaidi.

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