Whereas Pakistan’s new government grapples with the challenge of how to discipline the country economically, the International Monetary Fund (IMF) struggles with the challenge of how to recover its invested money with interest from Pakistan. Both parties find each other enigmatic and stubborn simultaneously.
Familiarity breeds contempt. Pakistan tended to enter into an agreement with the IMF and then violate the same with impunity just because the lenders supporting the IMF were utilizing Pakistan’s regional geo-strategic services. However, after August 2021 (when foreign forces vacated Afghanistan to mark the end of the 2001-2021 war against terrorism which consumed billions of dollars), the IMF restored its face of coming down hard on Pakistan, which had celebrated the event of vacating Afghanistan over a cup of tea in Kabul in September 2021. Pakistan has been paying the price of the cup.
Pakistan’s habit of overstretching its limits is getting back to haunt its economy. The IMF is now unpitying, as acknowledged by Shahbaz Sharif in his previous tenure of premiership. This time would be no different. Sponsors of the IMF do not see eye to eye with Pakistan, which stands almost isolated regionally. Pakistan has been reduced to using personal contacts of its citizens to secure loans from certain friendly countries to run its economic affairs. Now persons matter more than the country per se.
The immediate concern of Pakistan’s nascent government is to negotiate with the IMF to ensure the release of the third tranche amounting to $1.1 billion. The talks for getting any Extended Fund Facility (EFF) from the IMF will start afterwards, probably in the middle of April – after the successful completion of the ongoing Standby Agreement.
Therein lies the catch. Pakistan has to complete the current Standby Agreement successfully to reach the goal of asking for an EFF. It also means that the review of the second tranche, which is around the corner, should be successful to issue the third tranche. Currently, there are no talks taking place on the EFF. The media must understand this point, instead of generating any hype.
The Pakistanis revel in the delusion that the IMF team just look at the accountancy books and not outside the offices in Pakistan to see how the markets are bustling with activity, restaurants are full with customers for succulent cuisines, plazas are replete with imported goods, pizza deliveries are pervasive to serve urbanities till late night, and luxury cars and four-wheeler jeeps with tinted glasses are plied on the roads. Do they present any picture of a poor country stressed to avoid sovereign default on external payments?
Throw a glance out of the window and see the kind of vehicles government officials travel in, the kind of protocols the judges enjoy, and the kind of security the elected representatives utilize. Visit any urban city at night and see how people light their houses and shops, and how much people spend on functions and weddings. Do they present any picture of a near-bankrupt country?
Old habits die hard, so is old thinking. The Pakistanis are still waiting for a miracle to appear on the horizon from nowhere to rescue the country financially. Pakistan needs a rain of dollars. Tyranny is that neither Ukraine nor Gaza falls under the much touted geo-strategic ambit of Pakistan. This is why Pakistan’s Cold-War machinery stands almost idle. Nevertheless, it remained the success of the machinery to extend the bounty of the Cold War from 1991 to 2021. Whereas the world celebrated the end of the Cold War in December 1991, Pakistan had to do the same though reluctantly in August 2021. Afterwards, a reality dawned on Pakistan to survive on its own without any reward coming along. The year of 2021 marked the end of foreign financial aid.
Pakistan still refuses to drop the status of a client state, meant for serving the war needs of the West. Rumours bandied about Pakistan’s selling artillery shells to certain international firms (a third party) to support Ukraine (against Russia) are known. The order was a silver lining in the otherwise dark cloud. Silver lining because the IMF listened to Pakistan’s entreaties for financial help after Pakistan sold the shells worth $364 million as a tool provider in August 2022. The shells made the difference in softening the IMF. Obversely, the IMF tightened the screw to get the ammunition out of Pakistan.
On balance, factors favouring Pakistan’s utility in any war are getting fewer than Pakistan’s utility in global peace efforts. At least, the region expressing geo-strategic location defies Pakistan, as there is no war in the region. Pakistan’s Cold-War machinery is rusting, so is the Cold-War mentality.
Mid-March would witness Pakistan’s entering into negotiations with the IMF for securing the third tranche. Before that, to appease the IMF, Pakistan’s newly elected assembly will have to give a nod to privatization, besides enacting certain laws on facilitating taxation and reforming the tax machinery. New currency notes may see daylight. The policy of issuing circulars to give exemptions to certain sectors would receive a snub. With that, a spur of structural reform would begin hurtling Pakistan into the direction of self-sustenance. Moreover, a mini-budget would be generated, reflecting the kind of future awaiting Pakistan. The IMF is not blind. Only after passing this phase would make Pakistan eligible for requesting the EFF from the IMF.
Dr Qaisar Rashid
The writer is a freelance columnist. He can be reached at qaisarrashid@yahoo.com