Finally Pakistan and IMF have reached an agreement on reforms which would release around $500 million. According to the IMF statement, the Pakistani authorities remain committed to ambitious policy actions and structural reforms to strengthen economic resilience, advance sustainable growth, and achieve the EFF’s medium-term objectives. Finance Minister Dr Hafeez Sheikh has called it a good development for Pakistan. Minister for Industries and Production Hammad Azhar hopes the country’s economy, which according to him had successfully gone through a stabilization phase, would now enter the growth period. There are a lot of questions about the claims.
First, about where the economy currently stands. Pakistan has no doubt made progress in the industrial sector which has shown growth during the last six months. What must not be forgotten however is that in April last year industrial production had gone down 40 percent. A low base effect has played a role in the determination of 8 percent growth. Compared to growth figures three years back, however, the increase is only 3 percent. Yes, the remittances have increased by 19 percent. What is worrisome is that in the case of remittances from the Gulf the rate of increase is steadily declining, reaching 6 percent now.
Meanwhile agriculture has undergone historic losses. Cotton crop has suffered the most with production coming down to 34 percent, and less than 60 percent if compared to the highest record of production. Shortages in agricultural products have led to increases in imports, creating a trade deficit which is going to increase further with the oil price increasing to $61 per barrel. It may not be possible to achieve the tax revenue target. The government will have to shore up a yawning fiscal deficit by imposing more taxes and seeking costly loans.
As the country enters the IMF programme, it will be required to raise power, gas and petrol prices and follow policies that restrict growth and cause more unemployment. Even if the interest rate is not hiked, It may not remain possible to subsidize loans to export industries or offer relief by removing ‘peak hours’ electricity rate. No more overriding Ogra summaries seeking increases in petrol rates. There is little hope of the PTI government being able to provide relief to the common man during the rest of its tenure.
