ISLAMABAD: The government of Pakistan will have to choose between tough reforms for successful implementation of the $6.67bn IMF bailout package or resort to popular measures to please the general masses for mustering political support in the wake of protest sit-ins.
The IMF wants further curtailment of budget deficit as it has slashed down its projection for budget deficit target by fixing it at 4.4 percent of GDP against the officially envisaged target of 4.7 percent of GDP for the current fiscal year.
The next few months will make clear which path the government opts for to move ahead. Either it will push reforms ahead by sticking to financial discipline or will try to utilise funds for politically-motivated development schemes by compromising the macroeconomic stability.
Pakistan’s economy stands at a crossroads whereby the efforts made by Finance Minister Ishaq Dar in the last 17 months could evaporate if the government adopted the path of ruthless spending, which could ultimately force the government to abandon the IMF programme.
Although, the finance ministry had achieved budget deficit target of 1.2 percent of GDP for the first quarter of the current fiscal year through expenditure management yet picking up of over dozen balls at the same time could become harder with the passage of every month.
On the negative side of the economy, investment declined by 26 percent in the first quarter and rupee depreciation has added Rs260bn to the public debt.
The stock market showed an improvement after dipping in the last two months but those who lost had never gained again.
On the other hand, the IMF had recovered its previous loans after providing $6.67bn credit line under the Extended Fund Facility (EFF).
After one due instalment in near future, the IMF will be able to recover its previous loans amount that was given during the PPP tenure. “It seems that the IMF will get tough after the completion of fourth and fifth reviews under which Pakistan is expecting release of $1.1bn in the coming December,” added the sources.
Pakistan’s foreign currency reserves stand at $13.464bn and there is no possibility of an abrupt balance of payment crisis in the country. On the long-term basis, undertaking reforms seem difficult but it will yield dividends to the economy and the people of Pakistan. INTERNEWS
