Prolonged efforts of the government to get the package from International Monetary Fund (IMF) succeeded as the institution approved package for Pakistan. The Executive Board of the International Monetary Fund (IMF) on revived Pakistan’s bailout programme after a hiatus of six months, approving the $1.1 billion tranche and ending uncertainty that multiplied in past three days.
According to IMF, Pakistan’s economy will grow to around 3.5% but the average inflation rate is estimated at 19.9%. The global lender also approved an increase in the loan size to $6.5 billion and extended its expiry date till June 2023. The $6 billion original programme was going to end next month with half of the amount undisbursed due to failure of the PTI government to fulfil its commitments. With the augmentation, the programme size has been increased to the SDR4.988 billion, which is equivalent to 245.6 per cent of Pakistan’s quota.
Pakistan is currently facing difficult situation due to the worst flood of the country’s history. The already trembling economy of the country was going down with a great speed when the flood hit the country. In such a situation when all the reports are saying that nation will have to face more inflation in coming days the successful deal with IMF is a great sigh for the country. The deal with the global lender will resolve the core issues of the economy of the country. Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fueled domestic demand to unsustainable levels. The resultant economic overheating led to large fiscal external deficits in FY22, contributing to rising inflation, and eroding the reserve buffers. The programme seeks to address domestic and external imbalances, and ensure fiscal discipline and debt sustainability while protecting social spending, safeguarding monetary and financial stability, and maintaining a market-determined exchange rate and rebuilding external buffers.
Government tried hard to satisfy the lender. Pakistan assured the IMF that it remained committed to resuming reforms and already increased the electricity tariffs and withdrew the fuel subsidies besides restoring taxes. The Pakistani authorities informed the board members about the monetary tightening by 8% and setting the key policy rate at 15%, which according to them would help ease the inflationary pressure. However, the recent floods had broken the food supply chains, which would result in a significant spike in inflation. Under the IMF condition to enhance the monetary policy transmission, the rates of the two major refinancing schemes including Export Financing Scheme and Long Term Financing Facility were increased to 10%.
The failure on behalf of the current government is that it could not provide relief of even a single penny to the nation. Prices of eatables are going up with full pace, petroleum prices have touched the historical high, electricity has gone out of the range of people as they are unable to pay their bills, and even the essential goods have gone out of the range of common people. After getting the relief from IMF, government should give immediate relief to the masses. Prices of petroleum products and eatables should be decreased at once to provide relief to the masses.