The long-stalled bailout deal with the IMF is finally done — in what is indeed a piece of good news for Pakistan that has averted the threat of a default on its financial obligations, a threat that had been hanging almost since the PDM coalition took over in April last year. Under a renegotiated agreement spanning nine months, the Fund will provide the Government of Pakistan $3 billion to tackle a serious balance of payments crisis that has seen the dollar winging as high as Rs300, triggering backbreaking inflation hovering above 38%.
The agreement will, however, cost the masses dear as the government bowed to the IMF demand to: raise an additional Rs215 billion worth of taxes that will take the total tax collection target to an unrealistic Rs9.415 trillion; and slash total expenditures by Rs85 billion to shrink fiscal deficit. The new taxes will come in the form of higher power and gas tariffs and petrol prices that are already too much for the masses to put up with.
There is, however, an air of expectancy all around, with a range of experts hailing the agreement with the global lender as a step in the right direction. Together with the financial support from China ($5 billion), Saudi Arabia ($2 billion) and the UAE ($1 billion), the IMF dollars will bolster the country’s forex reserves and help the government in its efforts to stabilise the economy. Also in the works is a Special Investment Facilitation Council meant to harness the country’s untapped potential in key sectors through local development and foreign investments mainly from the Gulf and expediting project implementation. The plan — on which Pakistan Army is also on board — will serve as a streamlined interface for investors and remove impediments to investments.
The IMF deal, in conjunction with the investment facilitation council, serves to provide a roadmap to the country’s economic managers on how to proceed with the economic stabilisation plan. A ray of hope, indeed!
Published in The Express Tribune, July 3rd, 2023.