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There is total confusion and indecisiveness. When the Pakistan Democratic Movement (PDM) was formed the government, it had full weight of establishment behind it. A However, concurrently, Pakistan Muslim League-Nawaz (PML-N) leadership in London kept on undermining its own government.

PML-N’s ‘financial czar’ Ishaq Dar from day one is visibly toeing a different line against sitting Finance Minister Miftah Ismail. There is a visible political division within the PML-N. In the process, precious seven weeks have been wasted. Time is running out. And now it seems that chances of PDM staying in power for too long are thin.

The surprising element is that issues are graver within factions of PML-N. There is no tussle within coalition partners or with the establishment. It’s the issues inside the party that are delaying the matters. And crucial decisions are not being taken. Now it seems the tide is moving against the PDM. Courts decisions are not supporting them.

Cases against the PM Shehbaz Sharif are very much alive. Then the unexpected wave of public support garnered by ex-PM Imran Khan is making the current setup look weaker. Now there are (more than) rumors of a caretaker government being formed. Next few days are important.

The political battle of the past three months has put the crucial International Monetary Fund (IMF) review in pending. And State Bank of Pakistan’s (SBP’s) reserves fell from the level of $16.3 billion in Feb-end to $10.1 billion. With every passing day, anxiety is growing. Pakistan’s sovereign bonds are trading at a deep discount. PKR has crossed the psychological boundary of 200 against USD. Still there’s no decision.

The atmosphere, which is strongly characterized by indecision, can no longer be allowed to linger. The PDM has two options. One is to surrender and leave the mess for caretakers and the architects of this whole change to handle.

The other is to take risk, increase the petroleum prices in a staged manner, and present a tough budget, as agreed with the IMF. And then pick the battle of completing the term or going for early elections. It seems establishment cannot guarantee them anything today. Had the tough decisions been taken in the first few weeks, situation could have been different.

Nonetheless, the government has announced the budget date (10th June). IMF review will not be completed without budget. At best, the IMF talks in Doha must conclude in a positive manner with a press release for staff level agreement contingent upon taking prior actions. Expect IMF money to not come before July. However, IMF’s likely acquiescence would calm the economic sentiments.

The issue is that increasing petroleum prices (let’s say by Rs30-50/liter) is not the end. It’s the beginning of the journey. A tough year is ahead. The government would need to end the subsidies and then impose Petroleum Levy (PL) eventually. Then the budget would need some new revenue measures to meet the targets which are agreed with the IMF. It’s a full-fledged commitment.

Half-baked solutions (such as banning few luxury items) won’t cut it. And to do so, the incumbent finance minister must have the power without Ishaq Dar poking nose in every matter. PML-N top leadership needs to show courage by taking risks and to get out of Dar’s comfort zone.

If that is not the case, sooner the interim setup comes in, the better it will be. However, there are challenges. There is no provision in the constitution under which an interim government can present a budget. Caretakers only have authority on necessary expenditure (such as salaries and pension) for 120 days. An interim government cannot present the finance bill. And without the passage of budget, there is no IMF. Then there is an issue of negotiating with the IMF by caretakers.

There is a precedence of caretakers signing an IMF programme in 1993 when the PML-N government was ousted and there was a balance of payment crisis. Moeenuddin Qureshi — an economist, was brought in and he signed a deal with the IMF. The incoming government of PPP endorsed the IMF programme as well.

Thus, if the interim government can present budget, the IMF may complete the review, given the key political stakeholders (PPP, PTI and PML-N) endorse that they will own the budget once in power.

Now the burning question is the lack of constitutional provisioning for interim government to present budget. That is why some circles are pushing the government to present budget and negotiate with the IMF and at the same time they want early elections. But people sitting in London think that this will be suicidal for the PML-N while those in power here are pushing for stay. There is an impasse.

The government, if it presents budget, may not be able to stay long as guarantors have issues of their own survival. It appears all the roads are leading to fresh elections.

Copyright Business Recorder, 2022

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Ali Khizar

Ali Khizar is the Head of Research at Business Recorder

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