Pak in deep financial debt

BY Editorial30 Jun 2017 3:03 PM GMT

Though Pakistan government claims that the International Monetary Fund (IMF) is surplus to requirements, the country that mistrusts Western assistance noted missed fiscal targets and a ballooning current-account deficit. The fund's own projections a year ago for the fiscal year ending this June underestimated this deficit by about half the final total of $9bn. And based on trends in early April it overestimated the fiscal-year-end foreign-exchange reserves by $3bn. The IMF, on June 16, warned of re-emerging 'economic susceptibility' in Pakistan's economy. "We will not go back to the IMF programme," declared Ishaq Dar, the Finance Minister, in May, almost a year after the completion of Pakistan's most recent, $6.6bn bail-out. Sakib Sherani, a former government economist, says that to avoid "egg on its face" for cheerleading Pakistan's economic recovery just months ago, the IMF is slowly changing its story. By the end of 2018, many economists prognosticate Pakistan will come begging again.

The IMF, on June 16, warned of re-emerging 'economic susceptibility' in Pakistan's economy. "We will not go back to the IMF programme," declared Ishaq Dar, the Finance Minister, in May, almost a year after the completion of Pakistan's most recent, $6.6bn bail-out. Sakib Sherani, a former government economist, says that to avoid "egg on its face" for cheerleading Pakistan's economic recovery just months ago, the IMF is slowly changing its story. By the end of 2018, many economists prognosticate Pakistan will come begging again.

The Fund responds that it is "too early to speculate". Some of Pakistan's sitting on the fence can be blamed on misfortune, like a drastic fall in remittances from workers in the Middle East. But mostly it was on expected lines, i.e. their bad economic policy. Like its predecessors, the present Nawaz Sharif government has failed to enact the structural reforms needed to break Pakistan free of its cycle of crises. Barely any goals of the IMF's programme were met. Annual exports have declined by 20

Barely any goals of the IMF's programme were met. Annual exports have declined by 20 percent in dollar terms since 2013, sitting on the fence by an overvalued currency. It proves the government is again borrowing hand over fist from local and foreign banks. To make matters worse, instead of retorting its jaws at Pakistan's failure to meet targets, the IMF meekly indulged its partner. It kept acting 'like an ATM machine' even as Pakistan kicked serious reform into the long grass.

Surprisingly, Pakistan has taken out 12 IMF loans since 1988. Not only that, even China plans to invest $62bn in Pakistan for a range of projects, particularly power plants, around the 3,000 km China-Pakistan Economic Corridor (CPEC). That could lift Pakistan to more stable prosperity. But paying for the CPEC will not be easy. Unlike loans from the IMF or World Bank, when these loans come due, Pakistan will need a bigger bail-out than ever before. And with President Donald Trump in charge of America's foreign policy, there is no guarantee that the old one, America, will prove as generous—in the event of a crisis—as it has in the past.

Pak in deep financial debt

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