After IMF MD Kristalina Georgieva talked to the Atlantic Council before the arrival of federal Finance Minister Muhammad Aurangzeb in Washington about some of the conditions under which the IMF would lend to Pakistan, it was inevitable that Mr Aurangzeb would use his own appearance before the Council, his first engagement during the visit, to lay out his negotiating position. After Mr Aurangzeb had had his say, it was hard to avoid the image of two Wild West gunfighters taking up positions on a dusty street is some desert town. However, the appearances are being maintained, as what Mr Aurangzeb is saying is more or less what Ms Georgieva was saying.
Where she said that Pakistan was in need of reforms, Mr Aurangzeb said that the country was willing to carry out those reforms. As those reforms are not magic, but involve raising revenues so that Pakistan can repay its debts, the negotiations will probably involve the placing of a greater burden on the consumer, as he is likelier than not to be forced to pay more for both electricity and gas. The price of oil is tied to world markets, and there is no relief in that direction, with escalating tensions in the Middle East driving up oil prices. Pakistan is over a barrel because it urgently needs foreign exchange to service its debt. A recent World Bank report has identified Pakistan as one of 10 International Development Association countries whose debts are more than 10 percent of their GDPs. Without IMF funding, it is thus likely to default. Default carried many consequences, but freedom from the IMF is not one of them, as the Sri Lankan example has shown. After its default in 2022, it got onto an IMF Extended Fund Facility of $3 billion.
Mr Aurangzeb told the Council that Pakistan too would seek an EFF, for long enough to execute structural reforms. He said it was known what the reforms were, and the time was needed for their execution. However, it is to be hoped that the new EFF would allow reforms to be made, and not to provide a breathing space for them to be put off. Just because the Pakistan government needs the money should not be a reason for its people to be made subject to further suffering and sacrifices. It is to be seen what advantage Mr Aurangzeb gets from his mental attunedness to the IMF’s way of thinking.
