“Tough economic times lie ahead for citizens as Pakistan and IMF reach a staff-level deal”
On May 12, after months of discussions and negotiations, a staff-level agreement has been reached between Pakistan and the IMF.
The Pakistan-IMF accord would see Pakistan receive $6 billion over three years. Also, Islamabad is to also receive $2-3bn from World Bank, ADB, etc.
Moreover, the IMF has insisted upon decisive policies and reforms necessary for growth. It says that ‘market-determined exchange rate’ will help the financial sector.
” However, the financial adviser has already hinted at raising prices in some areas ‘to recover costs’ “
However, the financial adviser has already hinted at raising prices in some areas “to recover costs”. This news comes as anything but a respite for Pakistanis who are already feeling the full brunt of the inflation.
The most painful IMF accord with Pakistan
The PTI government has managed to get an IMF bailout on terms and conditions that are extremely rigid. They are not acceptable to some of the members of the Economic Advisory Council (EAC). Moreover, even important Finance Ministry officials are appalled and key members are not part of the negotiations.
The opposition has deemed the agreement a “complete sell-out of the country’s sovereignty” and demanded to bring the agreement before Parliament for discussion.
Resentment in public over the Pakistan-IMF deal
Certain measures have already been taken by the government for gradual compliance with the IMF’s demands even before signing the agreement. These measures already raised the prices of commodities of daily use beyond the reach of the common man. Moreover, there is resentment in public over the rise in the prices of basic food items, medicines, school fees, travel expenses, and house rents.
“Pakistan had already accepted IMF demands like a flexible exchange rate, withdrawal of subsidies, containing borrowings from State Bank and re-initiating the privatization process.”
IMF then came up with new goal posts. They included upfront discount rate by at least 2 percent, further depreciation of rupee against dollar and a huge rise in gas and power rates to retire the debt of the energy sector.
As the implementation of the IMF program begins, the common man is going to be under unprecedented economic pressures.
The backbreaking economic burden that the IMF has put on the millions will have consequences. There is a likelihood of the program may face suspension somewhere in the middle because of its hard terms and conditions.
This raises a further question of whether PTI government is undoing the wrongs of the previous governments and taking tough decisions. Decisions that are necessary but may stir anger and resentment in the general public. This anger is already reeling under inflationary pressures. Or, maybe the government really has no idea what it is doing and is inept.
Only time will tell.