There are now increasing discussions on economic and financial emergency and the different options that need to be taken into consideration to slow the economy down. It seems the government is turning deaf ears on taking the necessary steps to puts rein on the situation, many of which have been advocated in this space for more than six months. The government is stuck.
It appears that different circles in government or ruling party are not comprehending the gravity of the situation. The problem is not going to be resolved by merely bringing the current account into balance or in surplus. The issue of debt profiling needs to be resolved through restructuring. The problem is too much debt of short-term nature. Within the short-term debt, no commercial lender is ready to roll-over. This has to be fixed.
However, the finance minister is living in his own world. He is bullying the IMF, as if he has a solid backup plan in the absence of the IMF. He cares about the political capital of PML-N. Many parliamentarians of the ruling party still think that Dar would be able to do his magic. They still think that within six months the economy would be in batter shape to go into elections. And that is why they are content with how Dar is dealing with the economy.
The first thing that is required today is to get back to the IMF programme. Nothing short of that could work. Even if Dar arranges three billion additional dollars from friends. That won’t be enough. Austerity and belt tightening is required anyways. Without these, no one would be doling out debt.
With every passing week, the anxiety is growing. Some more selective restrictions are being imposed. As a sane mind in the ruling coalition rightly said, Dar is putting the sovereign default on the shoulders of the private sector. The government has not defaulted yet; but a liquidity crisis in the domestic private sector market is getting serious. Nothing is working right.
There is no one in the government with a clear mandate. When PML-N folks are grilled on reforms or on taking tough decisions, they reply that not much can be done in a coalition government. If that is the case, why stay in this coalition government? But no one is ready to leave. And no one is ready to take the right decisions.
Nonetheless, these financial emergency plans should be imposed anyways. Days should be shortened and weeks as well. Wedding functions should be limited and restricted. Foreign travel should only be allowed for education, health and work related. Rest all should be restricted.
But at the same time, fiscal austerity should be implemented. Gas prices must increase. New taxes should be imposed. And expenditure should be curtailed. Nothing is easy politically for the government. But they don’t have any choice either.