What’s next?

Dr Farrukh Saleem
Sunday, Sep 04, 2022

The IMF Executive Board’s meeting was held on August 29 for Pakistan’s “combined 7th and 8th reviews; request for waivers of nonobservance of performance criteria and for extension, augmentation and rephasing of access”. The Executive Board did three things: revived the bailout programme, increased the loan size from $6 billion to $6.5 billion, and extended the expiry date to June 2023. The Board’s decision has resulted in a disbursement of $1.1 billion. Dr Miftah Ismail and his team deserve full credit. Of the 23 arrangements that we have had with the IMF the 23rd one was the most difficult. The IMF kept on changing the goalpost every other week. The IMF really tested Dr Ismail’s patience and his tolerance. Dr Miftah showed good judgment and vision.

Hopefully, post-IMF Executive Board meeting, a couple of billion dollars from Qatar will come our way. Hopefully, a billion from Saudi Arabia (deferred oil payment). Hopefully, the UAE’s Abu Dhabi Investment Authority (ADIA) will invest a billion dollars buying stakes in our government-owned publicly listed companies.

Remember, Pakistan’s gross external financing requirement this year is $36 billion. The good news is that the government is on track in meeting this year’s requirement. Remember, we are going to need an additional $35 billion next year. The billion dollar question is if the government has a plan after the IMF, after Saudi Arabia, after UAE and after Qatar.

The government has told us that it is planning to borrow Rs6.78 trillion from commercial banks in just two months – August and September. The government has told us that it needs to repay previous loans and finance its budget deficit. The government has also told us that Pakistan’s total debt and liabilities have now hit a colossal Rs60 trillion. We know for a fact that 90 per cent of all FBR taxes go towards debt servicing, defense and grants. Does the government have a plan?

We know that the government has solid plans to borrow, borrow and borrow even more. Will the government please tell us how long the $5 billion from the IMF, Saudi Arabia, UAE and Qatar would last for? We know for a fact that our government loses $3 billion a month, every month of the year.

Our government knows full well that the current debt level is unsustainable. Our government knows full well that it is in a hole and still digging. Our government knows full well what happened to Sri Lanka when Sri Lanka failed to fulfill its obligations. We know that we need three things: a balanced budget; a privatization strategy to pay down debt and an economic growth strategy in order to grow out of debt.

Even after the IMF, global markets, where Pakistan’s bonds trade, still have an element of fear in them. This fear represents Pakistan’s medium-term outlook. This fear represents Pakistan’s political risks. This fear represents a lack of structural reforms. And this fear represents a lack of economic vision.

Two questions. Question number 1: Will the government please tell us if it has a fiscal consolidation plan? Question number 2: Will the government please tell us if it has a privatization strategy? Hopefully, all the planned loans will fall in place. What are the government’s plans after all the loans have fallen in place? Remember, ‘hope is not a plan’.

The writer is a columnist based in Islamabad. He tweets @saleemfarrukh and can be reached at: