Just as feared so often in this space, the International Monetary Fund (IMF) has expressed serious reservations about the PM’s recent relief package, which slashed Rs10/litre from the price of petrol and Rs5/unit from electricity prices, as well as the latest amnesty scheme that allows black money to bankroll the country’s industrial sector. That means the finance minister’s assurance, that the Fund had been told in advance, was not true; just like a lot of his statements about incentives announced since the time of the budget about eight months ago were false. The second round of talks, which starts next week, will tell more, but so far the Extended Fund Facility (EFF), which has so far extracted unprecedented sacrifices from the government and the people, is in uncharted territory and nobody can tell for sure about its fate.
Pakistan’s “one step forward, two steps back” approach, according to the IMF, can have serious budget implicants. Now who will the ruling party lash out against in case the Fund makes dispersal of future tranches contingent upon rolling back these provisions? It is very clear that the government took these steps for political mileage as the no-confidence situation was heating up, and did not give much thought at all to the political as well as economic fallout of another tangle with the Fund. As a result of the paralysis that is likely to follow, the whole country is going to suffer because of the precarious nature of national reserves at this point in time.
It’s no secret that without the IMF program the economy is dead in the water. Yet the government chose to imperil it for its own political survival. Now businesses as well as people should at least be forgiven for questioning the government’s actions that have a very direct impact on their investments and earnings. The least they deserve is transparency. A good point for the government to start would be explaining its “one step forward, two steps back” strategy.
