Pakistan and the International Monetary Fund (IMF) have failed to agree on the Memorandum of Economic and Financial Policies (MEFP) for the completion of the Sixth Review under the $6 billion Extended Fund Facility (EFF).
The government is in a perilous situation after the tough stance of global money lender. There are risks attached for Pakistan either with or without the IMF loans.
The situation of national economy becomes worse as the State Bank’s foreign currency reserves decreased by $1.6 billion in the past two weeks as Pakistan had paid $1 billion on maturity of the international Sukuk Bond.
On the other hand, inflation is rising as the Sensitive Price Index (SPI) stood at 14.5 percent this week as it increased by 1.4 percent in the last week. The adjustments made on POL and electricity prices as well as the devaluation of the rupee against the dollar caused inflation.
The devaluation of the rupee has played havoc with the economy, making the lives of fixed and low-income groups miserable. There is another danger that inflation may further go up as the Wholesale Price Index (WPI) stood at 19.6 percent for September 2021 month-on-month basis, so when it would translate into the retail stage, it might hike the CPI-based inflation with a certain time lag.
SHAUKAT TARIN: Meanwhile, Adviser to the prime minister on Finance and Revenues Shaukat Tarin, after completion of talks with the IMF, left Washington for Saudi Arabia. He will be part of the official entourage of Prime Minister Imran Khan, who has reached Riyadh.
IMF Resident Chief in Pakistan Teresa Daban Sanchez, when contacted, stated in her brief reply: “Still working on it”.
According to experts, the ball is now in the IMF’s court, so it remains to be seen in the coming days how it decides to proceed further.
It is learnt that the finance secretary is still in Washington.
DEADLOCK: Experts say the reason for the deadlock is that the government has one-and-a-half years on its disposal. The government found it difficult to make massive adjustments on all economic fronts. The IMF wants progress on the privatisation process in order to reduce financial burden on the government.
Moreover, it wants the power sector become viable by privatizing DISCOs.
Without the IMF programme, if the foreign currency reserves started depleting, it would be difficult for the government to stabilise the economy.
Despite rising prices in the global market, the PTI-led government plans to announce a massive subsidy programme for the low-income segment, it remains to be seen how it will be funded.
