Déjà vu: BoP crisis 2008

In the shadows of talks between the countrys economic managers and the IMF; whispers of discontent with fiscal commandeering are getting louder among independent economic experts. Unaffected by this chatter, government officials continue painting rosy projections of growth in exports and remittances, not to mention hope on as-yet-elusive 20 percent growth in tax collections. But the IMF may find assurances wanting, given the governments track record of policy inaction over the past three years on broadening the tax base doing away with subsidies, privatisation and corporatisation of public sector entities, autonomy of central bank or energy reforms. It is hardly surprising that media reports in recent days have hinted at governments intent to limit the use of CNG in private vehicles. Touting of such brave feats has coincided with talks with the IMF in recent times; each time to no avail, so independent observers are not impressed. Besides, it is unlikely that Finance Ministrys estimates, fit the mould of data gathered by the IMF, coordinating closely with myriad donor and lending agencies and the US. At the heart of this difference lies the balance of payments. Government estimates that the current account deficit will stay below $2 billion, while the IMFs projections may stand closer to $3.5 billion; and thats a big difference. The jury is out on the projection of prices of commodities exported by the country. The IMF is likely to be at least as informed as the government over the likelihood and timing of the disbursement of CSF transfers. Meanwhile, crude oil prices are sitting pretty over $100 per barrel. A return to the IMFs window though imminent; will likely not to be seen before the passage of some more months yet rest assured that the conditions attached to a fresh stand-by agreement will be even stiffer than the last programme. For starters, the financial crisis in the eurozone has brought the advanced economies to the IMF against whom other countries must now contend. Excessive exposure of the countrys banks to government T-bills reeks of default on domestic debt; notwithstanding the constant printing of money. International ratings agencies are quick to pounce when reviewing credit ratings. Other international lenders such as the World Bank and ADB follow the IMFs lead so flows will remain elusive from them, until the latters nod of approval. To compound this situation, private international investors are already wary of fresh investments in the country. The balance of payments is in for a squeeze. International bond issues of OGDC and other family jewels, currency swap arrangements and other strategic initiatives are well and good, but IMF will need more than just assurances in subsequent meetings.