EDITORIAL: A press release notes that the Federal Finance Minister Ishaq Dar as chief guest at an iftar dinner hosted by the Islamabad Chamber of Commerce and Industry noted that pledged assistance from friendly countries would materialise soon and the government was making all-out efforts to steer the economy out of the difficult situation in order to put it on the path of sustainable economic growth.
While it is now confirmed by members of the executive, including the prime minister and the finance minister, that the stalled ninth International Monetary Fund (IMF) review is due to some friendly countries failing to disburse pledged assistance - pledged to both the Pakistan government as well as to the IMF - yet what is baffling is the sustained failure of the 80 plus cabinet in general and the Finance Minister in particular to see the writing on the wall even after the Saudi Finance Minister Mohammed Bin Abdullah Al-Jadaan explicitly stated in Davos on 23 January this year that “we used to give direct grants and deposits without strings attached and we are changing that. We are working with multilateral institutions to actually say we need to see reforms.”
Business Recorder has been consistently challenging the policies since Dar took oath as the country’s finance minister end September 2022 that include the inane policy to control the rupee’s external value at a time when market intervention was not an option given the country’s appallingly low foreign exchange reserves, thereby generating a grey market that stifled remittance inflows through official channels as well as continuing policies of elite capture in terms of revenue generation (steadily rising reliance on indirect taxes whose incidence on the relatively poor is greater than on the rich) as well as in terms of expenditure with the dedicated for the poor/vulnerable Benazir Income Support Programme allocated a mere 400 billion rupees out of a total budgeted outlay of over 8 trillion rupees.
Qatar was reportedly not one of the “friendly” countries that had pledged roll-overs and additional assistance under the IMF programme; however, Dar made a two-day trip to Doha 25-26 January this year hoping to raise funds either through a loan or through sale of two LNG power plants (estimated value of 1.5 billion dollars) but met with no success patently evident from the abandonment of the controlled rupee policy on the 27, prompting the IMF to announce the dates of the ninth review mission: 31 January to 9 February.
As in the previous two IMF loans when two major coalition partners in the incumbent government were in power – in 2008 suspended early 2010 with two tranches remaining and 2013 completed in 2016 - the government’s approach to phase-out tough agreed conditions by getting waivers and/or unlocking a stalled review has been to seek assistance from the United States. It has been reported that Foreign Minister Bilawal Bhutto-Zardari has already engaged with US authorities to provide assistance in unlocking the stalled ninth review.
As did Ishaq Dar on 26 January 2023 when he met with a visiting US Treasury delegation. And on 14 March 2023, US Ambassador to Pakistan Blome acknowledged that the US is working with Pakistan to find a solution to the challenges it is facing in all sectors, adding that the IMF programme is also a part of the process. This continuing inordinate focus on the US reflects little understanding of the changing geo-political considerations that began during the Trump Presidency and have since consolidated.
The recent historic China-brokered re-establishment of relations between Iran and Saudi Arabia, much to the chagrin of the US and its strongest regional ally Israel, is indicative of this fact. Or in other words, the influence necessary for the US to convince the Saudis to meet its assistance pledge to Pakistan in spite of our economic team leaders implementing economic policies that may do credit to the accounting profession but not to that of an economist may no longer be compelling.
There is overwhelming empirical evidence that the current economic team leaders are unable to tackle the pervasive economic crises and instead of ushering in structural reforms that would show a light at the end of the long tunnel there appears to be a focus on passing the buck onto the middle income and lower income public through raising utility tariffs, thereby fuelling inflation as in the past. And what is equally disturbing is their insistence on living in a past that is no longer relevant.
Copyright Business Recorder, 2023
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