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Sunday, May 22, 2022
EditorialGoing back to IMF

Going back to IMF

As the new government has set out with its journey, the foremost important task it faces is the revival of the economy and its sustainability. As it is a race against the time, the newly-appointed finance adviser, Miftah Ismail, without wasting any time, has resumed talks with the International Monetary Fund (IMF) and is likely to leave for Washington to meet the IMF officials to resume talks on the stalled loan tranche that was withheld due to the political upheaval and the ouster of the Imran Khan government, the major architect of the deal, a few weeks ago. Earlier, former finance minister Shaukat Tarin was holding talks with the IMF, and now the monetary institution would be dealing with a new financial czar, who represents a coalition government.

The most immediate task for the new finance ministry head is to secure the tranche of $1 billion at the earliest so the debt service goes ahead without major disruption and the upcoming budget can be planned without any major event. The biggest hurdle for the finance ministry is the quarterly review of the economy by the IMF, which is often time-consuming and mind-boggling for local officials. Miftah’s major task is not to club two quarterly reviews. And the other task on his mind is to convince the IMF officials not to pressure the new political government to give up the relief measures announced by the previous government. This is an open secret now that the IMF wants Pakistan to abolish the subsidy given on petrol prices and electricity tariffs, which the previous government had announced to cool down the political and public pressure being built up against the government. Former prime minister Imran Khan, in an address to the nation, had announced an Rs10 cut in petroleum prices and an Rs5 per power unit cut on power bills.

Miftah Ismael needs to do homework and prepare convincing arguments to fight his case before the IMF, which has been sending not-so-friendly gestures in the past few weeks. The IMF, on a stern note, has asked the Shehbaz Sharif government to go for a steep fiscal adjustment of close to Rs1.3 trillion before asking for a new round of talks. The other pre-talks conditions include a hike in petrol prices and the withdrawal of a no-questions-asked relief scheme for industrialists, restoration of taxes, cut in circular debt, increase in power rates, and introduction of fiscal savings. The Shehbaz government has limited and hard choices. It will have to pass on the burden of the IMF terms to the public sooner or later. The more delay in implementation of the terms, the more severe consequences will the government face. Miftah needs to go to friendly countries in the region, such as China and Saudi Arabia, and ask for immediate relief packages so that the toughness of the IMF could be handled. Moreover, it is high time that the government took tough decisions at the start of its tenure on petroleum prices and other relief measures to put the country’s economy on the right track.

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