The IMF has finally approved the $1.1 billion tranche for Pakistan ending the uncertainty created by the Pakistan Terik-e-Insaf’s last minute attempt to sabotage the deal. The IMF’s failure to approve the bailout programme could have led Pakistan to default, with serious economic consequences. Pakistan managed in the last six weeks to secure loans, financing, deferred oil payments and investment commitments close to $12 billion from China, Saudi Arabia, Qatar and the UAE. However, much of this would have become available only after the IMF board approved the release of the $1.1 billion payout. The bail out will help Pakistan approach multilateral lenders for loans. The cash-strapped country has got the much needed relief at a time when it grapples with an economic crisis worsened by massive floods.
The bailout however brings no immediate relief to the common man who is currently grappling with over 44 percent inflation, the highest in the history of the country, caused by an increase in the prices of petroleum products and disruption in the supply of commodities due to floods and heavy rains. With the IMF advising tight monetary policy and a raise in power rates, the suffering on the part of the man in the street will continue meanwhile.
It is for the government now to devise policy measures aimed at getting rid of the balance of payments crisis and mounting debt that leads the country to the IMF again and again. For this the government needs to cut its coat according to its cloth. The government has to avoid political exigencies influencing its economic policies. The tendency to allocate huge funds to parliamentarians to ensure their loyalty has to be abandoned. Similarly, tax relief provided to large segments of the population for political reasons must end. Bringing down regional tensions through better diplomacy can lead to reduction in defence expenditure. The country has to increase exports and attract investments to have enough stock of foreign exchange. Unless the government sets its house in order, Prime Ministers will continue to carry the begging bowl and knock at the doors of the IMF when unable to pay back the loans.
