New govt fears IMF bailout to hamper reforms

| New setup needs $10b to $11b to meet financing gap

2018-08-15T03:32:00+05:00 Imran Ali Kundi

ISLAMABAD - Pakistan Tehreek-e-Insaf (PTI), the government in-waiting, is seriously contemplating various alternative plans to avoid International Monetary Fund (IMF) programme which according to PTI would hit its economic plan especially generating employment opportunities.

PTI chairman Imran Khan, who is all set to become next Prime Minister on August 18, has reportedly asked Asad Umar to consider the alternative plan of borrowing instead of approaching IMF for bailout package. "PTI thinks that approaching IMF will be the last option," said a leader of PTI wishing not to be named.

He was of the view that the new government would have to accept the tough conditions of IMF for loan programme, which may keep the PTI led coalition government away from its own reform agenda.

Sharing some of the alternate plan, he said that new government may seek help from the friendly countries and overseas Pakistanis. The country's financing gap is estimated in the range of $10 billion to $11 billion for the ongoing fiscal year.

However, China had recently pledged to give around two billion dollars to Pakistan to improve its foreign exchange reserves, which has slightly eased the pressure.

Meanwhile, according to a media report, Pakistan is also planning to borrow more than $4billion from the Saudi-backed Islamic Development Bank as part of its attempts to restore dangerously low stocks of foreign currency.

Asad Umar, the expected next Finance Minister, has recently informed about his out of box solution that PTI-led government would launch investment bonds for overseas Pakistanis.

The bond would be same as the Central Directorate of National Savings (CDNS) launching a dollar-denominated bond for attracting investment from millions of overseas Pakistanis.

The next government might also launch Sukuk bond in the international market to generate billion of dollars.

However, officials of Ministry of Finance believed that government has limited options than to approach the IMF.

They said that IMF programme would enable the World Bank and Asian Development Bank and other development partners to assist the government in its economic plan.

The PTI wants to avoid IMF programme, as it would have to introduce unpopular measures if it goes into the IMF programme. The IMF programme is always tough for the successive governments in terms of its conditions for giving loans.

The Fund provides its assistance alongside a policy mix to restore the macroeconomic stability of the country.

The economic experts believed that approaching IMF will be disastrous as it will bring recession and hardship for the poor.

The government would have to accept the conditions of the IMF under bailout package.

The IMF always emphasise on reducing the subsidies, which are normally given to the power sector. The government would have to increase the power tariff to reduce the subsidies.

The reduction in subsidies also fuelled the inflation rate in the country.  Similarly, the government also accept the one of the conditions of IMF of withdrawing tax exemptions and concessions given to different sectors of the economy.

The international lender may also emphasize to arrest the losses by Pakistan International Airlines (PIA) and Pakistan Steel Mill (PSM), likely by privatizing the loss-making public sector entities.

Privatization of public sector entities may create unrest in these organizations due to the worker unions' pressure.

 

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