Former Vice President of FPCCI Atif Ikram Sheikh on Sunday lauded the decision of Prime Minister Shahbaz Sharif to resume the stalled IMF programme which is necessary to improve limping economy and infuse confidence in the jittery investors.
After an unnecessary delay, the government has decided to step back from its rigid position on the IMF’s bailout conditions and lean towards an early resumption of the stalled loan programme which is a very sensible choice, he said.
Atif Ikram Sheikh, who has also served as Chairman of PVMA, said that the government had invited the lender to start negotiations to sort out all outstanding issues.
These issues have impeded the IMF’s ninth review for almost four months and delayed the disbursement of the next loan tranche, which has destabilised the economy, he said.
It is said that the government has completed its workings, and now it should waste no time to close the deal central to stabilising Pakistan’s weakening external sector.
The acceptance of IMF conditions will be against the wishes of some economic managers who oppose the free float of the rupee, but they have never realised the gravity of the situation, he observed.
The dollar value is hardly a convincing reason to delay action on the IMF’s demands, especially when the lender is the last option.
Atif Ikram Sheikh said that it remained to be seen whether the IMF will send its team by the end of next week or if it will wait for Pakistan to execute the actions needed to meet its conditions before the formal meeting.
Implementation of the IMF conditions, including a market-based exchange rate, increase in electricity and gas rates, additional taxes to contain the budget deficit within the original programme targets, removal of import curbs, etc. will further make life difficult for the masses and damage PML-N’s political capital ahead of polls in Punjab and KP, as well as the approaching general elections but there is no other option, he observed.
Further delay in repairing the relationship with the IMF will only worsen the political price his party will have to pay.
Pakistan has a poor record with low credibility. Therefore, the onus falls on adjustment first and then staggered financing. The three-year programme would have 12 reviews, and the successful completion of a review can trigger the release of a tranche.
But our economic managers want to get financing first and delay some conditionalities. Seeking financing from friendly countries and then approaching the IMF board to relax timelines for implementing prior actions is an attempt to ease the liquidity pressure.
The cost of postponing the adjustment measures is increased uncertainty and distortions, which may lead to even tougher policy actions. We are already witnessing the hoarding of dollars. Parallel markets are the inflow of export proceeds and remittances through hundi, decreased supply to the inter-bank market and widening the spread between the official and unofficial markets.
The Saudi finance minister’s statement that supports to allies would be aligned with multilateral agencies and would also depend on the countries’ willingness to revamp their economy indicates that the investment and other financial support plans announced recently by friendly countries for Pakistan will not materialise without an IMF programme.