Dr Reza Baqir, former governor of Pakistan’s central bank, hailed on Thursday the recent “good news” and developments over the country’s International Monetary Fund (IMF) programme, saying that it “ought to send a very good signal” on the Washington-based lender’s view on the economy.
Dr Baqir – speaking during an online event, ‘A conversation on Pakistan’s current economic crisis’, organised by the International Growth Centre (IGC) – was referring to the recent IMF statement that confirmed Pakistan has completed the last prior action for the combined seventh and eighth review.
Other speakers were Dr Shanta Devarajan, Professor at Georgetown University’s Edmond A. Walsh School of Foreign Service, and Dr Homi Kharas, Senior fellow at the Centre for Sustainable Development at Brookings Institution. Dr Ijaz Nabi, Country Director IGC, was the moderator.
“It is very good news that we have been hearing about the conditions for taking the IMF to the board have been completed,” Dr Baqir, who served as State Bank of Pakistan (SBP) governor between May, 2019 and May, 2022, said.
“I understand that date has also been set.”
He said that when this stage is reached it sends a very good signal about the IMF's view on Pakistan’s economic prospects.
“And the rally we are seeing in the rupee is not coincidental with the IMF announcement. There all the conditions have been met to that effect,” he added, referring to the appreciation run that has seen the rupee gain nearly 6% since it hit an all-time low of 239.94 in the inter-bank market on July 28.
“The most interesting or important period starts the first day after the completion of the review. Until its completion, there is tremendous and sharp pressure on economic policymakers to do whatever it takes to complete the review. It’s a crescendo that keeps building up.”
He said the continuation of the momentum in policymaking is very important.
Meanwhile, Dr Kharas said Pakistan must follow in the footsteps of the Philippines where the country brought transparency. “People (there) can go through the performance of policymakers.
“Things such as the budget have been made very technical, which allows everything to remain obscure.”
He added that Pakistan needs to address its structural issues to avoid going to the IMF all the time.
He further said that Pakistan has a liquidity, not solvency issue, because external debt is low. “But it should be addressed before it becomes a solvency issue,” said Dr Kharas, adding that Pakistan needs growth and it should also come from public sector investment such as infrastructure, health and education.
Dr Devarajan said Sri Lanka delayed going to the IMF and therefore, has been facing its worst financial crisis.
He called the crisis in Sri Lanka “100% political” because the rulers did not take the right decisions on time for political mileage.