At a paltry $6.1 billion, the central bank’s foreign exchange holdings are alarmingly low. The bank has explained how a series of repayments of external debt has led to the current decline, but the logical conclusion of that explanation is that the situation is going to get much worse, since there are more repayments to be made in the near future.
This, and some other factors yet again underline the dire need to revive our arrangement with the IMF, which had been put on hold because the ruling PDM, and the League, which is in the driving seat when it comes to financial matters, feels that the political costs of some of the conditions that the Fund insists on are too high. This is not the declared position, obviously; going by its statements, the government feels that acquiescence to the donor agency’s demands would be bad for the citizenry.
Those conditions? The IMF wants the government to be completely Laissez-faire as far as the value of the Rupee versus the US Dollar is concerned. The government isn’t playing ball, and is doing so, unsuccessfully, yielding a large black market for the greenback. Then there is the insistence that the government remove subsidies for the utilities and also those for fuel. This, the government spurned only recently, by announcing a whopping ten-rupee slash.
The government is trying, yes, to get some bailouts from friendly countries, whether in the form of loans or oil payment restructuring, but even those are half-measures. Even those are very difficult to come through in the absence of the IMF signing off on its deal, given how the latter would inspire confidence amongst the aforementioned friendly countries.
The PDM overthrew the previous dispensation for a number of reasons, it says. But to save the economy from sinking was the one it cited the most, to get brownie points from an electorate that was finding it difficult to make ends meet. It has turned out to be a failure as far as that is concerned.
The PML(N) knew what it was getting into. It is time to be the adult in the room, and take those tough decisions.
