EDITORIAL: Permanent Representative of International Monetary Fund (IMF) in Islamabad Esther Perez Ruiz said business recorder that “the IMF expects to put mission in May for discussion with authorities’ policy on the further seventh expanded financial mechanism review. betrothal remains constructive”.
Waiting based on in government the fulfillment of the “a priori” condition is explicitly and unambiguously marked in in one- paragraph of the IMF press release dated April 24, 2022 after reaching an agreement with visiting Pakistani team led by Finance Minister Miftah Ismail that “immediate action is needed to reverse the unfunded subsidies that have slowed discussions for Seventh review”.
This condition remains unsatisfied to this day and further complicate former finance minister who extremely close to the statements of the PML-N leadership on a private channel that “we can’t overload common people by raising prices of oil and products … we must run country, and not destroy it by taking dictations.”
Such comments are extremely useless, considering current state of in economy as next business day after they were delivered, stock market dropped by 3.23 percent in one day with stock investors lose more more than 228 billion rupees.
At the same time, the rupiah depreciated by 0.48. percent against United States dollar(interbank rate), which not only feeds inflation on all imported items including oil and products, but also raises amount of subsidy required.
Unnecessarily add this emotional statement made on former finance minister completely missing basic economic justification: higher subsidies as a result of price subsidies of oil and products of the previous government on February 28, rightly noticed out like a drone attack’ on Pakistan economy not only operating finances minister but also independent economists, higher budget deficit is highly inflationary policy.
Therefore, the question must be asked whether continuing these subsidies is less inflationary than (i) rise in in budget deficiency; (ii) postponement of Seventh review negotiation with the IMF, which contributes to the depreciation of the rupee, again inflationary policy; and (iii) decline in stock market reflecting of negative market perception with implied on Gross domestic product (GDP).
What also Today, it is clear that the IMF is no longer willing to renegotiate the terms of the EFF. package — whether due to changing geopolitical considerations or fact that Pakistan has consistently failed to implement the structural reforms it agreed to in all previous twenty-two programs.
Shaukat Tarin, outgoing finance minister tried and failed revise terms agreed in 2019, although he was also initially optimistic that he could successfully convince the Fund phase out severe preconditions – view premise on his previous engagement with Fund in 2008.
Pakistan economy today is still at a crossroads again. budget deficit can be solved by reducing current consumption, with subsidizes a component that can be adjusted easy like other basic current consumption items may not be as easy to adjust, especially debt maintenance, defense, pensions and administrative expenses.
It is true that adjusting subsidies can have serious consequences on consumer price index, and given the tense political atmosphere today, maybe option what government may not want to take. However, further delay is likely even more serious consequences on quality of a life of in general public in months ahead, when elections are much closer.
Another option is to call on friendly countries extend a helping hand, option led by Shahbaz Sharif government took like his predecessor Imran Khan; however, although the Khan’s administration succeeded in obtaining collateral of over $11 billion in 2018 still amount was not enough to meet the needs of the country. requirements and were subsequently agreed by the IMF EFF in May 2019.
The worst situation prevails today with in trade deficit July-April at a historical maximum of $39.1 billion, while the comparable figure for 2017-18 amounted to 30.1 billion dollars. rollover of provide objects of assistance and further assistance from friendly countries (Saudi Arabia and UAE), reportedly on renewal of thwarted by the IMF.
It is hoped that the cabinet will adopt informed economic decisions with one goal in view – Balance of Payment (BoP) – and not allow political considerations dictate their agenda. He must shake up in economy until it’s not too late.
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