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Sunday December 04, 2022

IMF’s micromanagement

July 15, 2022

LAHORE: Pakistan’s economy moves up and down based on daily events. Positive news on deals with the IMF moves the capital market and negative news pulls it down. This dependence on foreign inflows must go for a sustained growth path.

The delay in decision by the IMF enabled the speculators and manipulators to skim small traders. The IMF has interfered in so many spheres of our economy that we have almost lost our economic independence.

The handlers of the IMF on Pakistan should now openly spell out their demands in public and their intent to bail out Pakistan clearly to save small investors from speculators.

The news of positive IMF intent has flashed three times in one month that boosted the capital market. The rumors of IMF stalling the approval circulated more than six times that brought the capital market down.

The SECP should perform an audit of the trading patterns when the capital market turns bearish and when it is dovish. The likely outcome would be that around a dozen big players dispose of their shares at peak value on the first sign of bearish trend (in fact it is these brokers that determine when to turn market bearish). They make hefty profits on the shares bought at low values as they quickly buy the shares in the bearish market before turning it bearish.

It is for this reason that the IMF should be transparent, clear, and quick in approval or refusal of its program. The small investors usually do not make their own assessments on the capital market.

When the Chinese deposited $2.3 billion with the SBP at the start of this month it was clear that talks with the IMF were moving in the right direction. After that all rumors were spread to play with the sentiments of small investors.

These manipulative tactics have ensured that some of the big players in the capital market are among the richest individuals in the country.

It is a matter of concern that an impression prevails in Pakistan that the IMF is micro-managing our economy. The IMF should keep an eye on the revenues that the government of Pakistan agreed to generate.

The rulers must not worry whether to pass on the benefit of decline in global oil rates to the consumers if they adhere to the promise of increasing petroleum levy by Rs10 per month.

The next increase is due on the first of next month. If the current trend in global crude oil rates continued the promised increase would be adjusted and still leave room for further decrease in domestic petroleum rates.

The IMF should remain firm on the conditions agreed with the government of Pakistan but should not interfere in the day-to-day decisions that the government takes which it deems are good for the citizens.

The government of Pakistan is well aware that it is starved of resources and it cannot spare any further resources for subsidies but it has the right to adjust both petrol and power rates if the global prices of fuels go down.

There should also be no objection if the government imposed a super tax on the rich.

The previous government favored the banks irrationally. The state provided banks the money for house loans at 2 percent and the banks charged 19 percent from the home loaners. Is it fair? The micromanaging IMF never objected to this.

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