A politician looks up to the next election while a statesman’s vision extends beyond the welfare of the next two generations of the nation. Politicians are produced in abundance while a visionary leader is rarely born in a nation’s history.
Pakistan is one such example, particularly in present times, where vote politics is at its best. Unfortunately, however, people’s misery is not on its incumbent government’s agenda.
Foreseeing that the elections could be around the corner, the incumbent government’s focus has now filtered down to two short-term compulsions: (i) to present a populist budget; and (ii) to stay out of default as long as the government lasts.
The government appears to have figured out a strategy to achieve both. It appears to have decided to set aside the complex issues such as rising inflation, loss of rupee value, unemployment, food shortages, closure of industries due to import restrictions and collapse of exports and investments for the present and to leave it behind as a carry-forward for the next government.
It is apparent that the settlement with the International Monetary Fund (IMF), over time, has become more complex. In other words, it is unlikely in the short term. Therefore, at this point of time, the IMF does not seem to be a priority of the government as the IMF programme may restrict the government from presenting a populist budget.
To postpone the likelihood of a default, the Finance Ministry said early this week that arrangements had been made to repay or roll over the $3.7 billion debt. “This should not be any cause of concern as arrangements have been made for the rollover/repayment of this debt,” the ministry said in a statement.
Pakistan faces a total of $3.7 billion of debt repayments during the remainder of the current fiscal year, Fitch Ratings said, according to Bloomberg. “About $700 million of maturities are due in May and another $3 billion in June,” Fitch expects $2.4 billion of deposits and loans from China will be rolled over, the report added.
Another source also collaborated: “We consider that Pakistan will meet its external payments for the remainder of this fiscal year ending in June,” Grace Lim, a sovereign analyst with the ratings company in Singapore, was quoted as saying in an emailed response to Bloomberg.
Pakistan would sail through the forthcoming budget phase with ease. But, beyond it lie numerous troubles. Currently, foreign exchange reserves held by the State Bank of Pakistan (SBP) are at $4.46 billion, barely enough for a month of essential imports.
Whereas, as of 31st December 2022, Pakistan’s total external public debt stood at USD 86.56 billion. Around 74 per cent (i.e. USD 64 billion) of the total external public debt was from multilateral and bilateral development partners including the IMF, having concessional terms and longer maturity, 17 per cent (i.e. USD 14.6 billion) from international capital markets and foreign commercial banks, and eight per cent (i.e. USD 7.0 billion) of the total external public debt constitutes deposits from friendly countries (China and Saudi Arabia).
The government paid an amount of USD 8.258 billion during the period July–December 2022 on account of debt servicing of external public loans. This consists of principal repayment of USD 6.902 billion and interest payments of USD 1.355 billion.
Pakistan could face sovereign default without an International Monetary Fund (IMF) bailout programme as the country is likely to embrace uncertain financing options beyond June, Bloomberg reported while quoting Moody’s Investors Service on Tuesday.
Last month, the IMF mission chief said the lender is looking forward to obtaining the necessary financing assurances as soon as possible to pave the way for the successful completion of the 9th EFF review, a statement that came after Pakistan secured $3 billion in fresh inflow from Saudi Arabia and the UAE.
The IMF programme for Pakistan is an imperative. But, it is unlikely that the IMF will commit its funds in the present state of political turmoil and uncertainty; hence its present foot-dragging. In all probability, the IMF task will be picked up by the next government, signaling the urgency for a political settlement and a fresh elected government in office.
Copyright Business Recorder, 2023