After several days of negotiation, the IMF review reached a staff-level agreement with Pakistan, which should lead to the release of the final $1.1 billion tranche of the current Stand-By Arrangement next month by the IMF Board of Directors. This agreement must have provided a sigh of relief to newly-inducted Finance Minister Muahmmad Aurangzeb, as it marked the accomplishment of his first task, leaving him now to handle the next two. It was also a prelude to those tasks, for the next thing is the negotiation of a medium-term package, one which Pakistan has already indicated to the review mission that it will apply for. Though mo application has been made yet, while announcing the agreement to the Cabinet, Prime Minister Shehbaz Sharif also told it that the government would apply for another package. This would be the 15th package Pakistan would get from the IMF.
Mr Aurangzeb’s further task, beyond that agreement, will be to prepare a budget including the measures agreed in that package. Already, to pass the review, he has already agreed a couple of measures for the Budget, though it is not clear to what extent they will count towards the new agreement. These include the almost formulaic agreement to increase electricity and gas prices, as well as the GST registration of online digital platforms. However, there does not seem to be any certainty that even if a package is obtained and completed successfully, Pakistan’s foreign exchange crisis will be over. Pakistan completed a programme before, under Mian Nawaz Sharif, but ultimately the country had to have recourse to the IMF.
The IMF seems to have dropped a brick, with its suggestion that the NFC Award be revisited. As Sindh CM Murad Ali Shah was quick to point out, the Constitution does not allow this. The Shehbaz government is nowhere near the two-thirds majority needed to amend the Constitution. From advocating a cut in military expenditure to adopting the view that the NFC Award should be revisited is not just a reversal of stance, but saddles it with another battle it probably cannot win. It has not been able to do much about the circular debt, but continues to use it as a stick to beat Pakistan over the head with. It seems to have run out of worthwhile suggestions, so it comes up with ones that will be rejected out of hand. That does not make for good business.
