The government’s early closure plan may not work the wonders that have been promised. Even if one was to accept the figures that the government has let slip, of Rs 82 billion, it will not cover the estimated gap of $33 billion, or Rs 7.5 trillion approximately, at Wednesday’s rate of Rs 226 to the dollar, needed this year to finance debt servicing and the current account deficit. It is actually the kind of minor tweaking that is carried out as a minor component of a much larger, much more serious, package. The pity of it is that the government’s figures are so wildly optimistic as to be just plain wrong. Far from the professional caution for which accountants like him are famous, Finance Minister Ishaq Dar seems to be indulging in a flight of fantasy.
There is another reason for this measure to fall flat on its face: KP and Punjab have refused to implement it. The federal government may well claim that this is politically motivated, and this might be true because the two provinces have got PTI governments. However, those provinces are relying on trader organizations for resistance to this move, which has only been possible because the move has been deeply unpopular among traders, and instead of building up support by solving the crisis which has proved so damaging to it, may well cause it to displease one of its most reliable votebank, the small trader.
The government has not taken any of the steps which the IMF is demanding it take, such as letting the dollar loose, and leaving it to find its natural level, which will probably cause plentiful and widespread pain to the consumer. However, the present policy of trying to avoid the steps the IMF demands does not seem to be working. It may be painful to do what the IMF wants, but the government must ask itself two questions. First, is avoiding the IMF’s demands working, in terms of bringing about any improvement in the economy? Second, does it have any real choice? One problem, seemingly insurmountable, is that any measures for the necessary switch to renewable sources, like wind or solar, demands an appropriate lead time. While important initiatives, they cannot help the country in its present crisis.
