The current state of affairs has made it abundantly clear that our country’s economy is currently in dire straits due to our government’s bad policies as well as the worst-case scenario of the global recession brought on by the avian flu pandemic, the Russia-Ukraine conflict, and the COVID pandemic. There is no other way for Pakistan to escape the predicament than to agree to the IMF’s stringent requirements and get its financial assistance. The government has finally agreed to present a modest budget since friendly nations have also stated that we must first improve our system before we can receive their assistance.
Pakistan has informed the IMF, according to Prime Minister Shehbaz Sharif, the government wants to finish the ninth review of the $7 billion Extended Fund Facility. As the government eventually decides to present a mini-budget and address other IMF issues that are expected to exacerbate inflation, hurdles continue to materialize in materializing their reasonable outcomes towards a macroeconomic recovery path.
Based on current and predicted events, another IMF programme with possibly stiffer restrictions is almost a foregone conclusion, but sailing through these situations will be difficult. Although the goal of the financial institution’s requirements is to help our economy stand on its own, it is also true that the implementation of these conditions would make life miserable for the great majority of people due to the rise in electricity and gas costs, the petroleum levy, and other levies. The political repercussion of those choices is the multi-party coalition government’s reluctance during the past few months to agree to the IMF’s requirements, yet time has shown that this hesitation has caused the economic situation to continue to worsen.
Beginning with the impending general elections in the two provinces, especially the crucial battleground of Punjab, the authorities will soon be making difficult decisions that will be bitter pills for the voters. The forthcoming economic storm will primarily be characterized by an increase in power and gas prices, as well as a new set of tax measures and an increase in interest rates.
Economists predict that the cumulative effect of these measures will increase inflation, which is currently hovering around 25%, by an additional five to ten percentage points. Therefore, in order to stabilise the economy, the public must be consulted and difficult decisions that have been postponed for decades must be made right away. Among these, privatisation of government institutions that are losing money is crucial. Following the agreement, around $1.2 billion will be released immediately, and receiving financial aid from creditors, including friendly nations, will be made easier.
There are issues with the government. One solution for it might be to declare general elections and allow the incoming administration to make even more difficult choices, but by that point, the crisis would have grown to enormous dimensions. The new administration would need another IMF programme if it wanted to implement all the structural reforms that previous administrations, starting with Shaukat Aziz, had put off.
All parties have historically supported and resisted the privatisation of loss-making firms, particularly electricity and gas corporations, tariff setting for the energy sector by regulators, and transparency subsidy operations for commodities like sugar, wheat, and fertilisers, etc.
To lessen the hardships that the public would experience as a result of difficult choices, all unneeded government spending and all advantages enjoyed by the ruling elite must be eradicated. This will have political repercussions, and they won’t be pleasant. This occurs at a crucial time when the economy is experiencing stagflation, an unfortunate confluence of high inflation and slow growth.
