Deal at last
There were speculations that the new finance adviser was itching to get the deal done before markets opened on Monday. He was just a few minutes late, but not too late, to share the news with the nation. As the standard nine’ o clock news bulletin was midway he broke the news of having struck a deal with the IMF through the national television.
According to the bailout package, $6 billion shall be disbursed over the next three years to meet foreign debt obligations. In addition another $2 to $3 billion will come from the World Bank and Asian Development Bank over the next three years.
Bleak as the economic situation has been in the country since the PTI took over the reins of government, this should have been a good piece of news for the businesses. But, surprisingly, the KSE on Monday dipped close to a thousand points. Financial analysts held the tough terms attached to the IMF package responsible for the bearish trend.
People with stakes and interest in the economic affairs in the country have been saying this since August last year, around the time this government started to hold parlays with the Fund. The former finance minister, a capable man in his own right, was found out of his depth when dealing with the fragile economy. On most occasions, he was found playing to the gallery, issuing statements to the effect of forcing the all-powerful IMF’s hand at getting it to agree to the terms being set by Pakistan. He overplayed his hand and was eased out, many say at the insistence of the Fund.
The bailout comes when all the vital indicators were sloping down incrementally. The trade deficit has reached $20 billion, foreign exchange reserves dipped by 50 per cent, and the growth rate is at an eight-year low. It shall go even lower during the next fiscal year.
The delay but helped to further worsen the situation while the terms got only more stringent. And Pakistan signed on the proverbial dotted line – a thing it could have chosen to do six months ago.
The agreement is yet subject to IMF Board approval and more importantly timely implementation of prior agreed actions on the part of the Pakistan government; these actions – the nature of which no one exactly knows at this stage – are a major cause for concern for the business community and which is reflecting in the trading trends.
Opposition also says the deal means more inflation, more taxes, and increase in the gas, electricity and oil prices. The sentiment in the parliament, in the business circles and on the street is the same – it is of worry and concern. The package may bail out the government for a brief period; its fallout for a common man, however, is bound to be disastrous.