On taking over as Prime Minister of the country, Imran Khan had very candidly announced about the empty coffers and ever-increasing burden of debt making it almost impossible for the PTI govt to sustain and making the economy grow. The public too was sympathetic and willing to support. However, somewhere something was going awry which has forced the public to reconsider their support to the fledgling govt.
The first mistake was the removal of Atif Rehman Mian, a Pakistani-American economist from the EAC, just because of his Ahmadiyya faith. Atif Mian, who was appointed to Economic Advisory Council by Imran Khan to help assist in issues of economics and finance, based on his merit, was removed under pressure from extremist individuals and groups including the far-right Islamist Tehreek-i-Labbaik (TLP) Pakistan. His removal further led to the resignation by two other economists Asim Ijaz Khawaja and Imran Rasul giving a big setback to the economic planning.
This episode was enough for the public to know that for Imran Khan, extremists and their support was more important than the country’s economy.
The second mistake being the delay in accepting the IMF bailout package which was on the horizon for a long time but the acceptance was being dilly-dallying. And when it was announced that the Pakistan government is seeking an IMF bailout it has invoked only surprises and criticisms. What was the need for delaying the decision for almost two months? Well, Finance Minister Asad Umar may have some solid explanation (blaming the previous govt) but the mistake had been made. The delay certainly resulted in irreparable damages.
However, a requirement to seek an IMF bailout was a must and it should not have come as a surprise or a shock. The financing requirements of Pakistan are whopping $28 billion for the current financial year, with approximately $8 billion due for debt repayment this year only. So it was very much evident that paired with a spiraling deficit, it was impossible for the PTI government to avoid the bailout without an economic miracle. However, Imran Khan wanted to deal with this situation by begging the public on the name of the country, selling cars, buffalos, and helicopters. What else was there to expect without good economists in the EAC and inexperienced portfolio holders in the new govt.
With any major bailout from the IMF, temporary financial setbacks are unavoidable and one of them being the rupee devaluation, which plunged to Rs. 134 against $1 and likely to plunge further. One of the major consequences linked to the IMF bailout. Similarly, it has started taking a toll on the stock exchange too. Highs and lows in any country’s economy are a natural inevitability and there is no logic in politicizing the same. But PTI govt and especially the IK has gone overboard washing the dirty linen in the public which has more of negative effects than any worthwhile positive one. In a catastrophe, this has led to PTI inviting criticism and shooing away the likely investors. A government may have inherited an economy in tatters, but for some ministers to make such statements only adds to the deteriorating of the economy. One cannot underestimate the importance of the element of trust when it comes to investment and buying. An economy which is constantly derided by its own government is likely to ward off foreign investors and companies.
As the FATF is still in discussion and Pakistan Govt considering the IMF bailout, it is difficult to say what is store for the country. A term of references for the bailout is yet to be discussed so, it is too soon to comment on the IMF bailout. The fact that IMF has cautioned Pakistan about the risks of financial transaction with China should be able to give an outline view of the actual picture.
10 Oct 2018/Wednesday. Written by Azadazraq