The postponement of the IMF’s board’s consideration of Pakistan’s application for a 37-month Extended Fund Facility of $7 billion has provided Pakistan more time to do round of it as main bilateral creditors, Saudi Arabia, China and the UAE, and get them either to dish out more money or ‘reprofile’ their loans, so as to allow Pakistan some relief on future payments. It now becomes clear why the IMF Board did not put Pakistan’s case on its agenda. There were still some conditionalities that Pakistan had to fulfill. It might seem to be both harsh and a shifting of the goalposts for Pakistan to be forced to take further actions, but it would be useful to divide them into two categories. First are those actions which had to be taken in the Budget, which were various fiscal measures to assure the IMF that Pakistan was indeed as committed to the reform process as it said it was. Second are a series of financial measures, which are taking more time than the fiscal measures, because Pakistan is dealing with third parties, over which neither Pakistan nor the IMF have any true control.
It must be realized that Pakistan has a sort of negative control: it may default. Apart from the geopolitical implications that this might have for the countries affected, it might also mean that they might lose all or some of the money they have already lent Pakistan. As it is, these countries do not have experience of lending the way the USA once did, with no belief that there would be any repayment.
The problem seems to be that the Pakistani team seems to be unable to wrap their heads around the concept that they, or rather the Pakistani taxpayers, will have to repay the loans which are being taken. Pakistan finds itself in the awkward position of obtaining commercial loans in order to repay previous ones. Without a change in attitude, Pakistan may not be able to end its dependence on foreign loans, which is what this IMF package is supposed to be all about. Unless the country uses the coming 37 months to bring about the sort of changes that are needed, it may well find itself at the end still in the sort of difficulties as at present, and as obliged to seek out yet another IMF bailout, and yet another reprofiling of bilateral LOANS.
