Pakistan’s Exit from IMF Package, Will the Cons Over Whelm the Pros?

Pakistan’s Exit from IMF Package, Will the Cons Over Whelm The Pros?

Ruthless elites slaughtering the public for their interests

By,

Mehboob Ahmad

Sr. Regional Manager Martin Dow Marker.

Ph.D. MGT (Marketing), MS-Marketing, MBA-Marketing, B. Sc. (Zoology)., AKU-MERCK-ABMTC,

“Pakistan cannot accept everything IMF says’, Dar tells lender on budget criticism”. Nowadays every second day such “proud” statements are being issued from the finance ministry & their political allies. Will the premature exit of Pakistan from the current bailout package of IMF be as feasible as being “vowed” by the finance head of the state or vice versa?

???Apparently, his decision is being carried out under the immense pressure of ruling elites & political gain for forthcoming elections. What so ever the cause may be, the decision seems to increase the stress upon the Pak rupee. The later discussion in this article will illuminate the pros & cons of this decision for Pakistanis as a whole.

???Pakistan secured a USD 6 billion IMF bailout in 2019, topped up with another USD 1 billion last year. ?Now the IMF is negotiating a staff-level agreement with Pakistan for a USD 1.1 billion bailout plan?on account of its severe economic crisis marked by falling currency and price rise.

???Pakistan's economy is facing a host of financial problems that have severely affected its overall development and growth. These host problems include high inflation, balance of payments crisis, fiscal deficit & energy crisis.

??The availability of external resources as a result of Pakistan’s foreign policy alignments during the Cold War and beyond created a habit of dependence on ‘outside help’. This habit urged successive governments (representing rural and urban elites to avoid economic reform, mobilize adequate revenue or tax its network of influential supporters.

??If we talk about the structural problems of Pakistan’s economy, it includes disproportionately higher involvement of government in economic activities, largely informal economy, agriculture remaining a major employer of the workforce, concentration on cotton-related production activities, policies biased toward import-substituting activities, neglect of services economy in public policies, low rate of savings and consequently inadequate investment to develop human resources and infrastructure, the inability of the government to collect enough tax revenues, neglect of small and medium enterprises, ineffective governance and institutional structures, lack of accountability, etc.

???Before exploring further details, we must glance at a snapshot of IMF structure and functions. The International Monetary Fund is maintained by the contribution of the member countries. The members are selected as per their experience, capacity and native country. The chairman of the executive board is the apex post of authority and is selected by the member countries via their voting rights. The level of contribution determines the voting rights of that country.

??The IMF has three main functions: overseeing economic development, lending, and capacity development. The group also provides assistance with Fiscal policy, Monetary and exchange rate policies, Banking and financial system supervision and regulation, policy advice, and training through its various technical assistance programs.

???Once some country intends to succeed to lend from the IMF, a piece of detailed structural advice is given by the IMF board for economic discipline to ensure payback of the borrowed amount and across-the-board prosperity for all strata within the state. These mutually agreed points are called packages and violation of any of these points is spotted as “breaching of contract”. Pakistani’s auditory memories remained echoing with this terminology when the IK government has not raised the petroleum price as per the agreement with IMF.

???What are the agreed points of IMF’s current bell-out package? Both sides had allegedly agreed to impose a strong monitory discipline to ensure the economic revival of the country. The agreement included the independence of the state bank, uniformity in the quarterly release of funds to all stakeholders, ban upon rehiring of retired officials. Ban upon double pension & salaries,?hike in energy tariffs, removal of energy subsidy, increase in taxation, privatization of public entities and ensuring the publication of assets of all public office holders including “kingmakers” & their assistants sitting under “Weighing Scale”, both enjoying the non-parallel perks & privileges. The kingmakers and their assistants and not ready to comply with the agreed terms and the fragile, frail, self-centred, and powerless politicians are not determined to comply with the agreed terms.

?Winding up the discussion about Pakistan’s decision about the premature exit from the bell-out package. The writer anticipates that this decision has been made under immense pressure from ruling elites & their assistants while putting national interest aside. This decision will push us towards economic instability due to a drop in investors' & lenders' confidence that will eventually hit the DFIs in the coming years. The international institutions are again alarmed about the hike in dollar price by more than 400 rupees in the coming days if Pakistan fails to secure dollars from friendly countries. So for excavating this situation, we must have to improve tax collection &Enhance exports & reduce expenses by strict measures & privatizing subsidized public institutions.

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