The IMF’s visit to assess our progress in reference to the Extended Fund Facility has ended with the Fund commending the government’s efforts in meeting the stated targets. No agreement has yet been reached on the release of another portion of the $6 billion tranche, but the signs are positive, barring a few disagreements over conditionalities moving forward.
There are troubling reports that a major sticking point in any formal agreement is our close trade partnership with China. Pursuing Free Trade Agreements (FTA) with other countries as advised by the IMF is not a bad idea, but only if it comes without the risk of estranging our closest ally. The government must continue sticking to its guns on this, because FTAs work both ways. The reason our import bill isn’t any higher is because a large volume of imported commodities come from China, and the cost of doing business with a neighbouring country is also highly advantageous.
Revenue collection and power tariffs are also still stumbling blocks preventing an agreement with the IMF. The current target set for the FBR is definitely not achievable, but some officers believe that even if this number would be revised, the hopes of managing to collect even a lower sum would be close to impossible. The government is also reportedly trying to stave off any additional increase in power tariffs, as that might just reduce growth prospects even further.
As is evident, there is still a long way to go before a deal is struck, but the government has been positive in its negotiations. All of the current disagreements exist because the government does not want the public to tighten their belts any further. The IMF must be made to understand that any further adjustments in these sectors will only damage Pakistan’s economy, and that is a problem for debt servicing as well. Our economic team must continue doing its best to make the Fund see our point of view.