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It didn’t take long for the IMF (International Monetary Fund) to red-flag the budget, did it? Just as feared in last week’s column, it still wants the government to “do more” to resume the stalled EFF (Extended Fund Facility), without which Pakistan can do little except run around like a headless chicken desperate for somebody to bail it out.

Also, with the EFF set to expire at the end of the month, the budget was really the last-ditch attempt to get the Fund to greenlight the 9th review. Now, if the “do more” means it wants the government to redraft the budget, cut more subsidies, raise more taxes, and all that, and come back with tighter policies that still may or may not be enough to unlock the remaining $1.2bn of the bailout program, that too within a fortnight, it’s just not being realistic.

Besides, how on earth is it possible for there to be so much confusion so close to the facility’s cut-off date? Surely, the finer details of such extensive programs are worked out months in advance. It’s not as if the finance minister just forgot to tick all the right boxes, after all, and once he says sorry and complies somebody in the Fund will press a button and everything will be alright.

To be fair, the PDM (Pakistan Democratic Movement) government did bite the bullet initially and took a lot of flak for it, especially when Miftah Ismail was finance minister, and walked away with the 7th and 8th reviews.

But it was the government’s own misreading of the resulting economic situation, especially inflation stoked by IMF’s structural adjustment, that made it ditch Miftah and enabled Ishaq Dar’s miraculous return from intensive care in London to give the ruling coalition back home a facelift. But, even as Dar sb reluctantly yielded to condition after condition set by the IMF, he could not overcome his old obsession with fiddling in the money market and remote-controlling the central bank – trademark Darnomics.

Somewhere in the run-up to the budget, then, it became amply clear that the EFF was already dead in the water. It just beggars belief that both sides still continued, and are still continuing, with the hide-and-seek that’s gone on since at least last November.

Journalists with ‘sources’ in the finance ministry will tell you that the government played along in the hope of securing financing from its usual friends; considering how all sorts of loans and grants tend to suddenly dry up the minute you break from the Fund. But, it soon turned out, that even old, time-tested friends like China, Saudi Arabia and the UAE (United Arab Emirates) weren’t willing to give any more money, for the first time, till the IMF was properly on board.

That’s how Pakistan’s ended with the worst of both worlds. It’s very unlikely that Dar sb would be able to pull something out of his hat to impress the Fund before Jun30. And chances of other countries stepping in are also very, very slim; not the least because all of them have made this much very clear over the last few months. So this would be a good time for Dar sb to roll out the Plan B he’s been talking about for a couple of weeks.

The only problem is that you just can’t take him for his word. Because he also spoke recently of plans of reprofiling bilateral debt to ease the repayment period, which no doubt gave markets much to contemplate. The country needs to pay back $23 billion over the next fiscal, after all, most likely with no IMF, and other lender, support.

So might as well consider re-profiling with bilateral creditors and steal some breathing space. But then the SBP (State Bank of Pakistan) governor threw cold water over the whole idea after the latest monetary policy statement, revealing that no such plan was under consideration and neither SBP nor the finance ministry was aware of it.

If the SBP governor is telling the truth, then the finance minister lied, both before and after the budget. But why would he lie? It couldn’t have been to send a message to the IMF, as a leading newspaper editorial has suggested, because it makes no difference to the lender’s ultimate decision about the 9th review.

And it couldn’t have been to “distract public attention from his fiscally irresponsible budget”, as the edit went on to wonder, because it didn’t take long for the sentiment to turn after the SBP governor exposed the lie, did it?

It is, however, known for sure that Pakistan’s foreign reserves will fall to $2.6b after a $900m payment to creditors by month-end – just when the EFF is scheduled to end – that too if China helps by rolling over $2.3b of its deposits.

That’s less than two months’ import cover, and about ten times less than the money owed in one fiscal year. And we have a clueless finance minister who can do nothing better than grope in the dark and try to spin his way out of every tight spot.

What are the markets supposed to make of all that?

Copyright Business Recorder, 2023

Comments

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Martian Jun 15, 2023 08:46am
and still this circus keep on performing with the blessings of its masters . Who should you blame ?
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KU Jun 15, 2023 11:18am
''Thou shall lie till the lie becomes true''. Now that another smoke screen has blown away, what propaganda awaits the nation? Most of the sectors of the economy, as well as the backbone of our economy, is shutting down, and court jesters are already punching out new propaganda against IMF and other donors, including previous governments or ghosts employed by our enemies. Appealing to the government’s senses is futile because they are not attuned to responsibility or compassion or welfare of people, and even after their incompetency and ill intentions have been exposed, the powers that be, still support them. It shows resolves are fairy tales and promoted to make fool the nation, while the only objective is self-serving benefits.
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Jhany Waalker Jun 15, 2023 01:50pm
Dar - Dar ul disaster.
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Fazeel Siddiqui (Overseas Pakistani) Jun 15, 2023 02:27pm
For ensuring disaster to common people life, thanks to PDM/PPP and Neutral rulers of 75 years, all not only liars but cruel munafiq in nature.
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Tulukan Mairandi Jun 15, 2023 02:45pm
the fund has totally stricken Pakistan badly. Now a default is just a matter of time.
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