The IMF deal is very likely on the cards. The lender of last resort is stuck with Pakistan irrespective of the country gaining fiscal prudence and instilling structural reforms. The final programme contours are nothing like initially planned out by the Fund. The IMF is in a bind as it must keep the fiscally and externally unsustainable country afloat.

The fine point is that if the previous Stand-By Arrangement (SBA), which was supposed to be the bridge facility till the new government came and signed into an Extended Finance Facility (EFF), was based on sustainable macroeconomy, then there is nothing wrong with the current conditions.

At the time of SBA, Pakistan’s macroeconomic conditions were more vulnerable. The SBP reserves went down to as low as $3.5 billion and secondary market yields on Pakistan’s global sovereign bonds were skyrocketing. The global situation was bleak as well – Sri Lanka defaulted, and others were moving in that direction as global inflation and high interest rates were making these sick economies sicker.

Now both the local and global conditions are better. There is no fear of immediate default and there are no indications on the run-on currency. Thus, if the debt was sustainable then, it should be very much now.

The reality is that neither the debt was sustainable then nor it is now. The fact is there were no efforts toward real reforms, then or now. However, the IMF cannot put its foot down now, as the Fund let it pass earlier. The government is leveraging upon it and is likely to get a $7.5 billion deal.

In essence, the IMF loan is nothing more than a working capital credit. The government is getting money to keep on running its unsustainable policies and poor-quality expenditure. And the revenue numbers are plugged to balance on paper while the measures are not enough to generate adequate revenues.

In the first MEFP sent by the IMF, there were taxes on agriculture and retailers. There is nothing on them in both federal and provincial budgets. These two sectors comprise of almost half of the economy. The government let these two sectors spur, and further taxed the already burdened remaining half.

PML-N and PPP attempted to protect their core constituencies – urban retailers and rural feudal. The axe falls on formal middle and lower- middle class, and the corporate sector. The sacred cows including civil and military bureaucracy are sheltered.

The coalition partners fought on the size of the cake (PSDP) and there was no debate on the quality of the spending and on multiplier impact of the spending. All they want is a share in the shrinking pie. Since a large part of the population did not vote for them, perhaps they don’t care for them.

And the IMF doesn’t care either. The harsh truth is that neither the IMF nor the government is interested in reforms and for the betterment of youthful economy.

Comments

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M. Zahid Iftikhar Jul 10, 2024 10:35am
More a tirade than research. BR has consistently shown itself to be heavily tilted towards PTI's sloganeering. Find faults with PDM - but don't forget that it was PTI that pushed country into default.
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KU Jul 10, 2024 10:56am
When is a debt ever sustainable? Its laughable. PSDP/other antics of a corrupt system, country n people are not the focus. The power-puff boys should know, if this goes on, there's no point of return.
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N Babri Jul 10, 2024 12:54pm
@M. Zahid Iftikhar, Only if you know how to read anything on unbiased basis. Anyways, the fact remains, no one voted for these retards, and now they are suffering.
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Humayun Jul 10, 2024 01:36pm
@M. Zahid Iftikhar, please qualify your statements and don't be a blind follower. The whole country is burning and you are still defending Nero.
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Yasmin Fatima Jul 10, 2024 02:49pm
@M. Zahid Iftikhar, right, but PTI is naive and was a fresh party who fell into the prey of this system.
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Retired Jul 10, 2024 02:53pm
@M. Zahid Iftikhar, If anything, it is a very mild take on leeches of Pakistani elites sucking the nation dry. Try counting cars with green number plates plying families for shopping in Islamabad!
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Ather Ibrahim Jul 10, 2024 02:56pm
There is zarai income tax being charged every year I can share the deposit challan to prove it. You may question the amount of it but it is being charged.
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Saleem Zia Jul 10, 2024 03:34pm
Excellent True Factual Analysis of **Corrupt Ineffecient Governmental Policies and Greedy Blood Suckes IMF??(
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Azhar Nadeem Jul 10, 2024 03:40pm
An apt article. Every word is true. The government does not care about their voters because they know that they do not need their votes to come and stay into the power.
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Khan Jul 10, 2024 05:03pm
A laughably troll article by Ali Khizar using vibes as source. Embarrassing.
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Cod Jul 10, 2024 05:07pm
@Humayun, no one is a blind follower. Even PDM supporters criticize thier leaders for dull policies unlike PTI's fanbase
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Orbital Chimps Jul 11, 2024 03:55am
@Ather Ibrahim, yes it is Rs. 2,000 if net income is 1.2 millions (not on revenue) whereas tax on salary class will be like 90,000 on same income (on gross amount)
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Usman Jul 11, 2024 08:23am
BR needs to stop the pti support plan.lately research articles have become pti support plans.writerd cant see the mess imran created.blind eye.
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Usman Jul 11, 2024 08:24am
@Retired, should have counted during pti timed and protested.stop following a cult where corrupts are borrowed from other parties.
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Abdullah Jul 11, 2024 08:26am
And the writer has forgotten the great era if economic growth under pti wherw despite begging no one gave money he left the country to default.
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Afraz Ahmed Jul 11, 2024 11:55am
Published in the wrong section. The article is more of an opinion than a research piece, telling the obvious.
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