With the International Monetary Fund (IMF) bailout package finally agreed to and a new budget on the horizon, the future of the country’s economy under the new government is being looked at with both optimism and dread in equal parts. In the immediate term, one has to look no further than the 816-point crash in the Karachi Stock Exchange on Monday as a direct result of the deal being approved. The index being at its lowest point since 2016 tells us that investors did not take to the news of incoming taxes and power tariffs increasing as a positive sign for business.

The feeling of trepidation comes with good reason; the approved package has the condition of bringing government expenditure in line with revenue and this means that government spending cuts and tax increases are to be expected in the incoming budget. Rising taxes will mean an increased cost of doing business and the economy is likely to see a contraction before it can stabilise.

Incoming inflation is going to be a problem regardless of what the government says about easing the burden on the average citizen through power costs remaining stable for consumption under 300 units per month. With a depreciating currency no longer kept artificially overvalued, import costs will see a rise leading to (the government hopes) a lower import bill simply because the prices will be too high for most to afford.

There are also genuine concerns regarding the language used in the IMF press release and the potential ramifications that might come about as a result. The details of the programme have yet to be made public, but new conditions on issues such as terror financing and the move to “rebalance current arrangements” in the case of the National Finance Commission (NFC) award point to political considerations being taken by the IMF. The government needs to ensure that it does not give too much ground to the international body and manages to keep the distribution of resources to the province in the control of the state.

Going to the IMF has always been the least preferential option for many reasons. But it cannot be denied that there were no other options available to the current government to keep the economy afloat. The next financial year will reveal if the ruling party can clear off circular debt, privatise loss-incurring public state enterprises and increase its revenue streams through direct progressive taxes that do not affect the lowest wage-earners in the country instead of those that can afford it. With wholesale adjustments to the economy that improve it in the long run, the only thing PTI can ensure now is that this 22nd bailout package is the last one Pakistan has to seek out.