Former Vice President of FPCCI Atif Ikram Sheikh said on Sunday that economic compulsions must overtake politics as the country’s survival is at stake while our future is linked to a strong economy. The IMF’s deal has improved investors’ confidence, and he said their tough reform preconditions are a must for economic recovery, which is badly needed.
Atif Ikram Sheikh, who has also served as President of ICCI and Chairman of PVMA, said today that Pakistan has been going through economic turmoil since last year and desperately sought an IMF bailout to avoid a default.
On June 23, the IMF announced an SBA, a bailout package of $3 billion for nine months; he observed that China provided a rollover of $3 billion, while Saudi Arabia and UAE also helped Pakistan with billions of dollars, improving the overall situation.
The former government had negotiated the IMF bailout package of a $6.5 billion loan programme in 2019 to be delivered over three years but decided not to implement the reforms for political reasons, leading to the suspension of tranches by the lender.
IMF’s loans always draw criticism, while loans from other sources are costly and never debated, he said, adding that many bilateral financiers always look to the IMF’s decisions before extending the financial bailout packages.
Atif Ikram Sheikh said that many believe IMF’s structural adjustment programmes do not consider local realities; its emphasis on a free-market economy impacts low-income people, and their other conditions hurt the masses. Therefore, IMF programmes remain unpopular for populist governments worldwide.
In Pakistan, the governments regularly announce subsidies to address rising prices and win over the electorates, but these subsidies need to be more sustainable and add to the budget deficit.
However, IMF programmes come with several conditionalities that are considered harsh on low-income people, as it insists on removing subsidies and reducing the budget deficit and other “non-essential” expenditures.
Many governments criticise IMF conditions, yet they see the lender’s support as the only means to gain creditors’ confidence.
He demanded that Pakistan reform the power sector so that the cost of electricity is recovered, remove all tax exemptions to boost revenue, improve foreign currency reserves, reduce the budget deficit, and allow a market-determined exchange rate.
We are in an election season, during which the IMF conditionalities will put serious pressure on the populist measure of the government. Still, hard economic decisions have to be taken to save the country, he said.