A perception is being gradually formed that the government has not succeeded in handling the economy. The rupee continues to fall, hitting the lowest ever rate of Rs 228 for a dollar. While the common man groans under the heavy burden of inflation there is also panic in the market. Even a section of the PML(N) leadership is unhappy with Finance Minister Miftah Ismail’s conduct of the economic policies. Despite the IMF and Pakistan having reached a staff-level agreement last week, the bailout package continues to be delayed for reasons that need to be removed. In case the IMF board meeting is not held before the end of this month, it can only be scheduled in the second half of August, leaving Pakistan to face the turmoil.
Right from the beginning the coalition government has faced a dilemma. It wanted to take the bitter pill proposed by the IMF while simultaneously keeping the public anger in check. This required a tightrope walk for which the PML(N)-led government was not prepared. For a while Dr Ismail toyed with the unrealistic idea of retaining the fuel subsidies as “the nation cannot endure it (i.e removal of subsidies).” At times he indulged in bluster to keep up the people’s morale. Dr Ismail claimed that the country needed $41 billion over the next 12 months and “I think it will happen.” If the Finance Minister hoped that with improvement of ties with the USA, international financial institutions and friendly countries would open their coffers to aid Pakistan, he was sadly mistaken. There is a perception that the government has yet to fulfill some of the undertakings given to the IMF without which the IMF’s Executive Board cannot meet to consider the bailout passage.
A notification by the government for increasing the electricity prices and the decision to impose Rs10 per unit levy on petrol and Rs5 per liter on high speed diesel from August 1 are still pending. Pakistan had undertaken to secure $4 billion financing from friendly countries. This turned out to be a false hope. Again. Pakistan has yet to send the letter of intent to the IMF detailing the actions undertaken to qualify for the loan tranche. While going for the no-confidence move, the PML(N) leaders had claimed they were doing so not for the party’s interest but for the state. They are now double-minded, causing problems for both.
