IMF’s Second Board Meeting


Dr Qaisar Rashid

The year 2023 is poised to shift two provisos onto the shoulder of the year 2024: first, economic stability is not possible without having political stability; and second, political stability is not possible without having credible general elections. If Pakistan were a country independent of the compulsion of seeking loans to run its affairs, the provisos would have lost their relevance and significance. There might have been no provisos at all.
Pakistan’s undue dependence on the help of international financial institutions to run its economy wades the country into the realm of caution: loan-givers are wary of the return of their money from a politically destabilised country. Any iota of political unrest forces them into hedging their bets. Currently, Pakistan is playing with fire. Controversies of all types are getting piled up along the road leading to general elections, overlooking the fact that, in early July 2023, a delegation of the International Monetary Fund (IMF) called on the leaders of major political parties to seek their support for the announced $3 billion bailout package, after having reached a staff level agreement on June 30, 2023.
The meeting of the delegation with politicians was unprecedented. Nevertheless, the delegation was committed to lowering down the risk of the loss of the IMF money. Consequently, the delegation not only sought assurance from main political players to stand by the prior conditions set by the IMF, but the delegation also got assurances not to sabotage the deal for political purposes. Only after seeking the assurances, did the delegation give a go-ahead signal to the IMF board to issue the first tranche, $1.2 billion. Retrospectively, Pakistan had virtually begged for the bailout to avoid sovereign default.
Pakistan seems to be oblivious of the fact that the IMF is answerable to the money lenders for its failure in saving their money from a prospective loss. The IMF is not beyond accountability. The second tranche of $700 million is yet to be released, conditional upon approval from the IMF board meeting due on January 11, 2024.
Before the IMF’s second board meeting, Pakistan has to show that it is taking all measures possible in making the general elections, due on February 8, free for all political parties. Otherwise, the IMF’s second board meeting has the potential to turn things topsy-turvy.
The time period from March to June 2024 would be decisive in re-setting the country’s itinerary, towards the goals set by the IMF. Certainly, the Pak-IMF companionship is expected to persist beyond June 2024, if Pakistan has to circumvent the next Sri Lanka in the making. Pakistan’s trajectory would be affected in certain perceivable ways.
First, Pakistan would have to show that it is doing away with the restrictions on the burgeoning of the market forces – to materialise the concept of market economy. The age of a controlled economy (or a command economy) is over. Just a couple of years ago, Pakistan had thought that it could prosper by adopting an economic model of a command economy. If wishes were horses! Pakistan could not help its citizens develop (or expand the existing) small scale industry. Time went by idly. Currently, Pakistan is thinking of reviving the agriculture sector – but mostly by foreign investment. It means naught. Instead, the future lies in relying on indigenous resources (material and manpower) including the promotion of the small scale manufacturing industry.
Second, Pakistan would have to move on the path of privatisation. With that, the potency of nationalism bearing perpetual financial losses incurred by failing national (public) organisations and institutions also stands diluted. For the financial survival of a country, nationalism is losing relevance. There is left little space for the sustenance of a financial loss in the name of maintaining a national asset. Instead, the emphasis is on building financial assets. That is, a State-owned organisation has to be profitable enough to support the national economy, otherwise let it perish or let the private sector take over it.
Third, Pakistan would have to bear with the reducing expanse of nationalism. The combination of privatisation and devolution is bound to feel national strategists panicky about losing the extent of nationalism. In 2024, not only several ministries would face closure but also the layoff process would take its toll. Similarly, the control on borders and commercial air flights would be reduced. The State’s monopoly over the Exit Control List would be minimised. Nervousness is visible, as Pakistan has been making all efforts to sell its assets to friendly countries – in a desperate hope that a semblance of nationalistic control will persist.
What if the IMF’s second board meeting decided adversely? In such a case, all hopes for economic revival would dash to the ground. Pakistan would be back to square one: how to avoid sovereign default. The resolve that the general elections would be held on time is insufficient, compared to the yet-to-be announced resolve that all political parties would take part in the elections freely – without any hindrance, overt or covert. In February 2024, any elections short of offering political stability are bound to fail Pakistan economically. Provisos of 2023 are despotic.
Whereas Pakistan is known for its risk-mongering attitude prevaricating on the delivery of promises (read democracy), Pakistan is in the firm grip of the debt crisis from which only the IMF offers a way out. The first ten days of January 2024 would decide which way Pakistan sways.