A transient hurrah?

For a government that seemed greatly embattled on several fronts as of last week, there is certainly a spring in its step following the unexpected success in raising roughly $10 billion in financial pledges from a number of multilateral development banks and bilateral countries for post-floods recovery, rehabilitation and reconstruction efforts earlier this week at the UN-backed global donors’ conference in Geneva.

There is a long way to realize those proceeds from global partners and channel them into climate-resilient, inclusive interventions to restore physical infrastructure, basic services, livelihood opportunities, and local economies. Skeptics are right to be wary, as a large influx of foreign aid has created a moral hazard in the past, compounded by the public sector’s weak capacity and patchy track record to deliver results.

While there is many a slip between the cup and the lip, the sitting government is gladly latching on to the positive vibes created by this surprising breakthrough for the state on both the financial and diplomatic fronts. The PM and his economic team must be well aware that they cannot count the chickens before they hatch, but it is in their political interest to inject some optimism, extract some breathing space and prepare the ground for the tough economic measures that cannot be put on hold any longer.

Since the ouster of the PTI government in April last year, the political stability in the country has oscillated almost every month between worst-ever (until that point in time) and reasonably adequate (by historical standards). With the PTI’s political state of affairs seemingly in visible disarray in the populous Punjab province, the PDM government at the center has practically weathered the demands of early elections. It is now increasingly looking at presenting the next budget in June and completing the term by mid-August.

While optimism is contagious, it has to translate into favorable economic conditions for households and businesses. As it stands, the cheerful mood in PDM’s corner won’t last long, as economic turbulence cannot be contained without restoring the bridge to the IMF. After record pledges were made for Pakistan earlier this week in Geneva, there have been suggestions that the Fund might go soft on some conditions after seeing the global outpouring of support for Pakistan. Don't be naïve – it won’t happen!

Heeding the IMF’s demands of higher taxes, stepper energy tariffs, and bigger levies (among others) presents a catch-22 situation for the ruling coalition. The PML-N-led government has to stay in power if the major party hopes to reverse the economic suffering and avoid an electoral catastrophe in the next polls. But in order to stay in power, it has to take a variety of measures that will cause even more economic suffering. Leaving the government now is not an option, as it would brand Shehbaz as incompetent and a quitter. There is apparently no way for PML-N to avoid being a major political casualty of this lose-lose situation.