To be or not to be


International Monetary Fund (IMF) programmes are, by definition, harsh and exacting because they are designed to bring the economy on the right track in the shortest time possible. They are different from the long term progammes of the World Bank. While the World Bank helps you devise a local strategy, the IMF does not have time for protracted design. The IMF is like a fireman. If your house is on fire, you have to listen to the fireman to save yourself.
We need the IMF because we cannot pay our international creditors and importers. We can blame this government or the last government or the last two governments, the reality does not change. The rest of the world is not interested in finding and punishing the culprit and six months from now, neither will be the people of Pakistan. The current government will have to put out the fire or it will lose local and international support. We cannot evade an IMF programme even if Saudi Arabia and the UAE assistance packages are received in toto. They will only delay the inevitable. Our current account deficit and coming debt servicing payments are way too big. Moreover, these friendly assistance packages miss a crucial ingredient that is an imperative for our economic recovery, i.e., the trust of the international investors. And this trust will only come with an IMF programme. The IMF is known internationally as a hard taskmaster, which puts economies (or at least their exchange rate management) back on track. The IMF conditionalities that we are wary of, are the very things the international investors acknowledge. They want guarantees before they put their hard-earned money in a country which has not shown much economic prudence in the last few decades and only IMF’s recipe can provide such confidence.
We cannot live without international capital, even if Pakistan can pay its current debt servicing payments and import bill. With a very young population, a minimal saving rate, scanty domestic investment and one of the lowest tax-to-GDP ratios, we are a few years away from public unrest, if we are not going to feed and employ our burgeoning population. If we do not enter an IMF programme soon, not only there will be no foreign investment but other creditors will also gradually decrease their lending to us. By not entering into an IMF programme and delaying our economic recovery, mainly due to political reasons. Asad Umar and his team know that they have to deal with the IMF sooner rather than later and that’s why Umar has never said that Pakistan would elude the IMF. The reason for delaying the inevitable is (perhaps) because of the PTI’s pre-election rhetoric. Imran Khan had promised that he would not beg/ask for loans from anyone.