Pakistan and the IMF finally reached a staff-level agreement on the much-awaited bailout program last week. So, Pakistan would now get a 39-month Extended Fund Facility (EFF) for about $6 billion. It is, however, a provisional agreement which is yet to be formally approved by the Executive Board of the IMF. Moreover, Pakistan has also been provided a long to-do list by the IMF to be eligible for this program which aims to support Pakistan “for stronger and more balanced growth by reducing domestic and external imbalances, improving the business environment, strengthening institutions, increasing transparency, and protecting social spending”.

Though the full details of the Pakistan-IMF agreement have yet not been made public, this program is being widely believed to be a tougher one which would require Pakistan to comply with a set of extensive IMF conditionalities. Noticeably, the scope of such conditionalities for Pakistan has expanded over a period of time covering almost every crucial aspect of the country’s fiscal as well as monetary policies. This may be a reason that many believe Pakistan has somehow compromised its financial sovereignty through this IMF program. Strangely, the IMF has also started setting some ‘preconditions’ in addition to its conventional conditionalities as far as Pakistan is concerned. Pakistan is supposed to fulfil such preconditions even before receiving a bailout from the IMF. The appointment of Reza Baqir, an IMF economist, as Governor State Bank of Pakistan is largely being viewed as part of such IMF preconditions. Similarly, Pakistan has also been asked to shift its managed exchange rate to market-determined flexible exchange rate.

Reportedly, as one of the IMF preconditions, Pakistan is actively trying to get written commitments from China, Saudi Arabia and UAE that they would rollover their loans extended to Pakistan which are due to be paid in next financial year. Interestingly, the IMF is currently reluctant to offer similar facility to Pakistan. The IMF is also pressing Pakistan to actively comply with the FATF’s Recommendations on anti-money laundering and counter-terror financing. It is apparently beyond the scope of IMF to ask Pakistan to do such things. Nor does this matter pose any direct credit risk to its bailout funding to Pakistan. Probably, this International Financial Institution has started doing similar things as part of its “Corporate Social Responsibility (CSR)”

After dilly-dallying on this issue briefly, the incumbent government decided to approach the IMF to bridge its rising current account deficit. So, the federal government formally requested the IMF for a bailout program in October last year. However, instead of promptly helping Pakistan come out of its acute financial crises, the IMF has only been setting multiple goalposts for Pakistan ever since. During this period, we have seen Pakistan’s economy further deteriorating on account of prevailing economic uncertainty. And Pakistani Rupee experienced an unprecedented devaluation. So, this much-delayed program has not been beneficial for Pakistan in any way. There has been no positive psychological impact of this program on Pakistan’s troubled economy. Similarly, the financing market in the country has also yet not positively responded to last week’s staff-level IMF agreement.

Presently, Pakistan is keenly looking for an IMF bailout. This program is being presented as if it miraculously helps Pakistan to overcome its major economic woes. One, however, absolutely fails to understand what economic miracle will happen if Pakistan succeeds in getting the promised $6 billion from the IMF in 3 years as it already has failed in overcoming its chronic current account deficit despite getting almost similar amount in just few months from its “friendly” countries like Saudi Arabia, China and UAE. At present, Pakistan’s current account deficit stands at around $12 billion. So, getting a meagre amount of $2 billion annually from the IMF would hardly help Pakistan substantially bridge such a large financing gap. On the other side, Pakistanis will certainly have to bear the brunt of the tougher IMF bailout conditionalities.

There is a saying: “The best way out is always through”. Pakistan certainly needs to look inwardly rather than outwardly to overcome its chronic economic woes. It needs to focus on its economic fundamentals to stabilize its domestic economy. In fact, the current account deficit simply indicates towards a macroeconomic malady characterized by a disadvantageous imbalance between the country’s imports and exports. Pakistan is currently experiencing a large current account deficit primarily owing to its falling exports compared to its exports. So logically, Pakistan should have proactively endeavoured to enhance its exports. Regrettably, the incumbent government has yet not made any serious attempt to address this major issue.

The government has only tried to treat the symptoms rather than the malady when it comes to bridging the country’s current account gap. It went from pillar to post to get financial assistance from both its friendly countries and ‘unfriendly’ IFIs to bridge its financing gap. However, it didn’t bother to identify and rectify things which have led to a rapid fall in Pakistan’s exports. Soon after coming into power, Prime Minister Imran Khan made a number of foreign visits to secure financial assistance and foreign investments in addition to seeking a bailout from the IMF. However, PM Imran Khan, or even our finance or commerce ministers, have yet not held any single significant meeting with the country’s businessmen, traders, investors and exporters to hear and address their real grievances. Similarly, there has also not been announced any trade, commerce or export policy by the incumbent government so far.

If the government can’t restore the confidence of domestic investors and businessesmen, how can it attract foreign investment to the country. And how can it revive its depressed economy. Pakistan should certainly now evolve and announce an ambitious export policy to boost its exports. Such export policy should be based, inter alia, on promoting an agro-based and export-oriented industrialization in the country. The government should remove the policy and administrative bottlenecks which are damaging its export potential. It should announce some special incentives for the exporters, especially in the textile sector. Pakistan certainly needs a proactive but prudential economic regulation to achieve an economic stabilization. Myopic economic policies and quick-fix remedies will get it nowhere.