The IMF is due to come to grips with the Pakistan Foreign Ministry over a new package this month, when it sends a team to Islamabad. However, it has used its report on the final review of the Stand-By arrangement to indicate what are to be its demands. Those are, as expected, be more raises in the gas and electricity tariffs, with a continued emphasis on the elimination of the circular debt in both sectors. It is doing so on the assumption that its measures so far have addressed the problem. The tariff hikes which have been such an important part of the common man’s burden, are to continue. The IMF also intends to hold the government to its commitment not to engage in any cross-subsidies of power, gas or fuel, and is also going to push on reforming the power sector, especially the DISCOs.
The IMF shed the requisite crocodile tears about the plight of the poor, but left the government no wriggle room for making any concessions to the need to lighten the suffering of the people. The IMF report took perhaps a somewhat pessimistic note about the risk of default, though it would be an unwise head that denied that the risk persists. It might not be as bad as the crisis last year, when it seemed that the country was avoiding default on its foreign debt from one repayment to another. The receding of that debt has not left the economy in good shape, as its projected growth of two percent (instead of seven or eight needed to provide the youth bulge jobs) and inflation of 17 percent (instead of under five percent, needed to keep growth going while avoiding the risk of hyperinflation), a stagflationary picture is painted.
The success or failure of an IMF programme must be judged by whether it helps the country get out of the debt trap, which would mean no longer having to go to the IMF for further loans, and being able to service its debt with an adequacy of foreign exchange earned by exports. So far, no IMF programme has even tried to take the country in that direction. The emphasis has been on revenue maximization by the government, the lack of care for the public welfare previously shown does not square with that it is now showing, It seems a negotiating tool rather than a serious concern.
