On Friday, the Chairman of National Business Group Pakistan, President of Pakistan Businessmen and Intellectuals Forum, and All Karachi Industrial Alliance, and former provincial minister Mian Zahid Hussain said Pakistan is between the devil and the deep blue sea over stringent IMF conditions. One reason for the delay is that the IMF’s release of the loan tranche needs more confidence, which will hit the budget-making exercise.
Mian Zahid Hussain said the ninth review of the IMF and the staff-level agreement should have been completed last year. Still, the previous regime violated the deal with the international organisation, so the ninth review needed to be completed. Talking to the business community, the veteran business leader said that people are constantly being told that all the new conditions of the IMF have been fulfilled and that the agreement will be concluded in a few days. Still, the IMF is changing the goalposts very frequently.
He observed that IMF is adding new demands to its list and asking Pakistan continuously to do more. Among the reasons for the unnecessary harshness on the part of the IMF is the fear of this institution that after receiving the loan, affairs in Pakistan will continue to be run irresponsibly and the expenditure will not be controlled, which will result in the country’s bankruptcy.
Mian Zahid Hussain further said that the IMF worries that billions of rupees will be wasted to please the voters before the elections, weakening the country’s faltering economy. It will result in disrepute of the lender if Pakistan defaults. The business leader said that China, Saudi Arabia and the United Arab Emirates had assured loans to Pakistan.
Inflation has crossed 36 per cent, the highest level in Asia, so the IMF demands a two per cent increase in the interest rates. Moreover, the Government is discouraging imports, resulting in a fall of 68 percent in the current account deficit in the last eight months, which is expected to decline further in the next four months. Import contraction is also reducing the revenue of FBR.
Mian Zahid Hussain said that economic instability is increasing rapidly due to continuous delays in the payment of loan instalments by the IMF. The current agreement with the IMF was signed in 2019 and expires next month.
According to the agreement, Pakistan was supposed to get a loan of six and a half billion dollars, but only 3.9 billion dollars have been received so far. The government has already accepted all IMF conditions on the exchange rate, tax rate, energy price, subsidy reduction and interest rate hike. Still, it has yet to convince IMF to release funds.
In this most difficult economic situation, he said that if the nation unites and implements the emergency program of import substitution and privatisation of failed government institutions, then this vortex can be exited.