I do not know whether or not the development that State Bank of Pakistan (SBP) has confirmed the receipt of $1.1 billion from the International Monetary Fund (IMF) gives birth to economic stability in the country in the real sense of the word. I have my doubts, so to speak.

One of these doubts stems from central bank’s decision to keep the policy rate unchanged at a whopping 22 percent, although there have been improvement, however modest, in the economic indicators since the key discount rate was elevated to 22 percent.

One of the principal improvements is a meaningful increase in country’s foreign exchange reserves. The other could be a noticeable decline in inflation now as compared to a year ago or so. Ever since the landing of IMF tranche in the SBP’s coffers, there is a heated debate in media about the likely contours of the next IMF programme.

In my view, it is a done deal, so to speak. But there is a general apprehension that in view of the extremely vulnerable position of Pakistan with regard to the making of timely external payments, the programme, according to noted economist Dr Hafiz A Pasha, for example, “will be extraordinarily tough in terms of the speed of adjustment and degree of rigidity of the agenda of structural reforms”.

The next IMF programme will be tough one, to say the least, in view of the fact that IMF is not a charity; in other words, it’s not an organization that gives alms or charity.

We must not lose sight of the fact that the approval for the “immediate” release of $1.1bn tranche by the IMF board had not come without some firm words: “To move Pakistan from stabilization to a strong and sustainable recovery the authorities need to continue their policy and reform efforts, including strict adherence to fiscal targets while protecting the vulnerable; a market-determined exchange rate to absorb external shocks; and broadening of structural reforms to support stronger and more inclusive growth.”

The foregoing indicates that the next programme will be tough one. Therefore, the incumbent government, which is deriving a lot of satisfaction from the release of IMF tranche, needs to pull its socks up without any further loss of time. It will be required to achieve fiscal consolidation, which will not be possible without reducing the current expenditure in a meaningful manner.

Hashim Reza

Karachi

Copyright Business Recorder, 2024