has been in a state of grave economic turmoil in recent years.
Political instability, corruption, mismanagement, the COVID-19 pandemic, a global energy crisis, and climate change-induced natural disasters
is seeking another bailout from the International Monetary Fund (IMF) to tackle the acute balance-of-payments crisis.
“We couldn’t survive without yet another IMF program,” Sharif told a meeting in Islamabad last week that was broadcast live.
His comments came a day after the IMF agreed a provisional or staff-level agreement with Islamabad which, if approved by its board, would disburse the last tranche of which expires on April 11.
The lender has already said it would formulate a medium-term program if Islamabad applies for it.
The government has not officially stated the size of the additional funding it is seeking under the long-term bailout.
What’s needed to revive the economy?
The economic crisis has hit the nation’s poor particularly hard, with many of its over 240 million people struggling to make ends meet.
Amid soaring inflation, hovering at around 30%, many Pakistanis have seen surging costs of essential items and a sharp decline in their real wages.
Foreign exchange reserves, meanwhile, are running low at just $8 billion, roughly enough for merely eight weeks of imports.
A general election held last month which now has the challenging task of tackling the nation’s deep-rooted structural problems to pull the about $350 billion economy out of its misery.
“If the government gets a long term IMF loan and comply with the terms of the deal, then the economy can revive,” Mohammed Sohail, CEO of Topline Securities, a Karachi-based brokerage firm, told DW.
The IMF’s programs, however, usually require a raft of
In Pakistan’s case, these measures could include scrapping popular subsidies on gas and electricity, broadening the tax base as well as sales of loss-making state-owned enterprises.
The government has already put up for sale some loss-making firms like the Pakistan International Airline (PIA), the national flag carrier that has long been accused of being bloated and poorly run.
“Privatization is definitely needed and long overdue in my opinion. What is often missed in rhetoric on privatization and job losses etc. is that we all, including the poor, pay for state-owned enterprises that are doing nothing and running in loss,” Safiya Aftab, an economist and policy analyst, told DW.
“We pay because the government covers their losses through budget allocations and by incurring debt,” she added.
Sohail echoes a similar view.
“Privatization of the airline and other loss-making firms works in favor of Pakistan as it will reduce government losses. We saw a similar situation with banks in the late 1990s and after privatization, banks in fact started giving back to the government,” he pointed out.
On track toward a military oligopoly?
But there’s also criticism of how authorities are pursuing the privatization drive.
“While the IMF’s demand for privatization makes sense, what is happening in Pakistan may not be what the global financial institution is asking for,” said Osama Malik, a legal expert.
He was referring to the setting up last year of a body, called the Special Investment Facilitation Council (SIFC), which the government said would help make investing faster and easier.
Malik alleged that the body is under the de facto control of the military, pointing to the inclusion of Pakistan’s army chief in it.
“We have recently seen prime leisure and tourism facilities owned by the federal government handed over to a newly incorporated company owned by the military. This kind of ‘privatization’ may create a military oligopoly in a country where the armed forces already have a huge stake in various corporate enterprises,” he underlined.
Years for growth to return
The painful reform measures will also likely cause more distress for people in the short term, say economists.
“Restrictions on imports have an impact on manufacturing, in particular, while cuts in the public sector development programs mean that there is less activity in the domestic economy,” Aftab said.
She noted economic recovery will be slow and it will take a few years for growth to return.
“The IMF program would not bring significant progress in the short run. But it will bring down the current account and fiscal deficits, which should help stabilize inflation,” she said.
“The IMF program is not really about boosting growth, it’s about achieving stabilization.”
Edited by: Srinivas Mazumdaru
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