With the country’s foreign exchange reserves with SBP taking a turn for the worst, falling to $7.5 billion over the past week, accompanied by an aura of uncertainty surrounding the current and future status of the IMF program, it is no surprise that the stock market opened in the red on Monday, shedding 550 points. While we were able to fulfill a $1 billion international bond payment on Friday, there were legitimate concerns of defaulting leading up to it and that too added to negative pressure on markets. To top it off, Finance Minister Ishaq Dar, in an interview to a private television channel over the weekend, when asked about the 9th IMF review, stated without any hesitancy or restraint, rather with disdain, that he ‘did not care if they come here or not, I will not plead before them’. Whether Mr Dar likes it or not, Pakistan is currently in an IMF program, granted, it’s not the one he would’ve negotiated but it’s the one we have. The IMF is therefore a reality the Finance Minister cannot simply wish away and ignore; more often than not it has proven to be a bitter pill to swallow in order to secure necessary funding to save the economy.
Pakistan’s perpetual hand to mouth financial condition is further evidenced by the fact that in order to not miss making the $1.08 billion international bond payment, $500 million received from AIIB were arranged to support FX reserves. The last major inflow of dollars was the IMF’s $1.2 billion tranche that came in October and most if not all of that has been consumed to keep from losing control of the USD/PKR parity. Apart from dwindling reserves and a shortage of dollars in the market, another key problem is a lack of political stability. Senator Dar is merely trying the same solutions as were tried by his PTI predecessors, which in turn were much the same as he himself tried before, and which have left the country where it is: one payment away from default. Pakistan is in the unenviable position of having to borrow on increasingly onerous terms in order to make the next payment on previous loans. Senator Dar was brought in to revive the economy and thus restore the sagging fortunes of the PML-N; but instead he is forced to run furiously to stay in the same debt-ridden spot.
