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Pakistan abandoned

Hard economic decisions will help its future

Bs_logoPakistan, Pakistan flag
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Business Standard Editorial Comment
3 min read Last Updated : May 28 2024 | 8:59 PM IST
A recent visit to Pakistan by a mission from the International Monetary Fund (IMF) left without staff-level agreement on a new package for the troubled economy. Prior briefing from the multilateral agency had stressed the downside risks to the local economy. The IMF staff said that discussion would continue virtually to finalise the financial support considered necessary. Yet there is no question that the deadline that the government in Islamabad had set for additional financing —  early July — is approaching without any apparent consensus. The IMF, it appears, is playing hardball with Pakistan. The sums involved are substantial: Pakistan may request as much as $6 billion, alongside additional financing from the IMF-administered Resilience and Sustainability Trust.

The stumbling block for Pakistan is clearly a general disbelief that the government will be able to achieve the political consensus necessary for deep reform. Prime Minister Shehbaz Sharif has been quite clearly apprised of the urgency of such change. In some recent statements he has gone as far as to directly compare Pakistan to Bangladesh’s success, noting that he felt “ashamed” when he considered the comparison. Yet Mr Sharif’s authority is circumscribed. Any civilian leader of Pakistan must of course contend with the fact that the military has the final say on most policy issues. But this government was only just returned to office after an election of less than complete credibility. The supporters of former Prime Minister Imran Khan, who remains in jail, are likely to protest any changes meant to put the economy on a firmer footing. General discontent with inflation and stagnant living standards is visible — there have been violent protests in Pakistan-Occupied Kashmir recently that left one policeman dead. Inflation has slowed somewhat but remained above 17 per cent in April 2024.

The fact that, even faced with these problems, Pakistan has struggled to get multilateral assistance is a signifier of the degree to which the West has lost interest in the country after the United States’ ill-advised withdrawal from Afghanistan early in President Joe Biden’s term of office. Pakistan has been forced to turn to its traditional patrons in the Gulf and China for assistance — though the latter has also failed to open its purse strings. Whether this is wise on the part of the West is open to question. An unstable Pakistan is, as decades of experience have shown, a breeding ground for destabilising forces. Once India’s own general elections are over, New Delhi will have to re-evaluate its approach to Pakistan, and consider whether the resumption of trade is in the national interest. But Pakistan’s fiscal stability is the most urgent requirement, and that will require buy-in from the West and the IMF. Given the extraordinary measures that the Fund has approved in the past for European countries like Greece and Ukraine, its failure to do so in Pakistan’s case will only underline the criticism of the Bretton Woods institutions that they serve broader Western geopolitical aims. This criticism can only be answered by a more cooperative approach from the IMF. However, the government in Islamabad will have to push structural reform. Pakistan must realise that it has lost the strategic advantage in geopolitics and its future depends on hard economic decisions.  

Topics :Business Standard Editorial CommentInternational Monetary FundPakistan IMF on India

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