The primary task of the Kakar caretaker cabinet may have been the holding of elections on time, but that, it is not going to do. That means that its financial management team does not merely have the task of handling the economy for 90 days, but for an indeterminate period that may last until February, if the Election Commission of Pakistan does complete delimitations by December 15. It will thus take up the bulk of the nine-month period of the SBA, which was approved by the IMF Board in June, and should last until next March. The SBA does not mean money handed over to Pakistan, but merely means money that it will lend to meet debt servicing payments.
That means sticking to the conditions set by the IMF, because the caretaker government not only must stay on the programme, but will supervise the preliminary work that will be needed for the new elected government to negotiate a new agreement with the IMF, which will presumably be of longer-term than nine months. The intentions of the new government became evident in the ease with which it went ahead with the rise in the prices of petrol and diesel for the current fortnight. A further rise in the electricity tariff is on the cards, and if the IMF asks for it, it will get it.
There are two other indicators which are showing a trace of worsening. One is the interest rate. Already at 22 percent, it has not delivered what it is supposed to have, a slowing of inflation, which strengthens the view that this wave is not demand-pull, but cost-push, and imported to boot. In worse news for the consumer, worried to a frazzle already by rising prices, the rupee is facing speculative pressure, as well as a worsening current account, which showed a deficit in July for the first time after four months of surplus.
The Kakar Cabinet has got sufficient weight to handle the task of keeping the IMF happy. The caretaker Finance Minister, Dr Shamshad Akhtar, not only has held the portfolio before, but has been Governor of the State Bank, as well as worked for the World Bank. A PM’s Adviser is Dr Waqar Masood Khan. Gohar Ejaz, the businessman, is Textiles Minister. The only problem will be it must keep it happy, even at the cost of the people of Pakistan.
