Back to the IMF?

Farhan BokhariSeptember 05, 2017

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The writer is an Islamabad-based journalist.

AS Pakistans liquid foreign currency reserves slip in the wake of a widening current account deficit,
falling overseas remittances and a growing international trade imbalance, a return to yet another
IMF bailout looks inevitable. The return to the Washington-based global lender by one of its most
mediocre and repeated clients appeared almost certain even before former prime minister Nawaz
Sharif was disqualified by the Supreme Court.

Any hope of Pakistans balance of payments comfortably holding out until next years parliamentary
elections appears increasingly unlikely. And, when there is a new loan agreement, the IMFs well-
known medicine will come with another round of belt-tightening measures, notably targeting
middle- and low-income households. In return, Pakistan will receive a new supply line of IMF funds
to unlock other international loans from various sources, notably multilateral agencies such as the
World Bank and commercial sources.

The outcome will seemingly halt a depletion of Pakistans foreign currency reserves and create a
sense of returning calm. However, if past trends are a guide, long-term reforms to help Pakistan
graduate beyond its repeated return to the IMF are unlikely.

Welcome to yet another tragic chapter in our economys

history.

Welcome to yet another tragic chapter in Pakistans haphazard economic journey, where a fresh IMF
rescue package looks increasingly likely. Though the PML-N government is eager to ascribe
worsening economic trends to events following the former premiers departure, nothing could be
further from the truth. Well before the Panama verdict was delivered, Pakistans exports were
already collapsing. And the current account deficit was an increasingly alarming fact of life even
when Sharifs disqualification was impossible to predict.

Pakistans present-day economic ailments have much to do with failures, including policy failures, of
recent years, either since or before the PML-Ns electoral victory of 2013. Together, the failure to
tackle the worst energy crisis in Pakistans history along with the failure to undertake other key
measures, including a much-needed devaluation of the rupee, have eroded Pakistans ability to meet
the challenge.

Meanwhile, the crisis surrounding Pakistans agriculture sector, though not necessarily of immediate
consequence to the future of foreign reserves, has added an adverse element to the economy. The
governments obsession with fanciful initiatives such as metro bus projects and high-speed roads
all with borrowed money runs the risk of becoming the proverbial white elephant unless Pakistans
ability to keep up with its mounting debt payments improves radically.

The discussion on Pakistans future relationship with the IMF will remain incomplete without
considering Islamabads past experiences. The bailouts facilitated by the lender recognised some of
the worst gaps in Pakistans economic framework, though it failed to oversee a raft of sorely needed
and long overdue structural reforms. The very fact that Pakistan today is looking at the prospect of
yet another IMF loan programme, less than a year after graduating from the last one, speaks volumes
for the failure to tackle the countrys multiple weaknesses.

A major economic overhaul will not succeed in bringing Pakistan on to the path of sustainable and
long-term improvement without forcing a much-needed rule of law surrounding the economy. This
ultimate goal will need to be built upon a radical reform of Pakistans tax collection system in tandem
with redefining the countrys economic philosophy. Fanciful ideas seen in recent years will have to be
set aside in favour of addressing urgent human needs, whose presence has practically placed more
than 70 million Pakistanis, or at least a third of the population, in abject poverty.

In approaching the IMF for another loan, elements of the last loan programme must be carefully
examined. Specifically, the IMFs decision to grant the reported 12 waivers over a three-year period
of the last loan must be probed in detail.

Driven by a brand new economic philosophy, Pakistan must immediately embark on a

comprehensive reform of the tax collection system, while also reorienting the countrys priorities
away from fancy initiatives to areas that matter the most for the mainstream. Without such a
fundamental reorientation of priorities, the danger is indeed much too obvious. As long as Pakistans
interests are driven by the elite to serve the elite, the countrys future will be interspersed with
periodic bailouts by the likes of the IMF in between short-lived eras of economic growth and
recovery.

Going forward, Pakistans economic outlook and a tainted repute of the ruling structure are not the
only elements that will be at stake. Of equal significance will be the credibility of the IMF and its
economic formula to begin fixing Pakistans economic ills.

The writer is an Islamabad-based journalist.

farhanbokhari@gmail.com

Published in Dawn, September 5th, 2017