Realistic
expectations
Prime Minister
(PM) Imran Khan’s address to the nation after returning from Saudi Arabia was
meant to proffer the good news that a $ six billion package had been secured
from the Kingdom, comprising $ three billion to be deposited to boost our depleted
foreign exchange reserves and the rest in the form of deferred payment for oil
imports. Had the PM confined himself to just this breakthrough, his address
would have come across as statesmanlike. However, Imran Khan being Imran Khan could
not let this (or any other) opportunity go to reiterate his signature themes. Describing
the package as a big relief, the PM said this would go some way towards
reducing our dependence on the IMF. Expectations are that the forthcoming
visits of Imran Khan to China and Malaysia may help bring in another $ 2-5
billion, which would further reduce the need for a bigger IMF loan that the PM
argued would put Pakistan in a stronger position to negotiate IMF
conditionalities. Since the IMF’s prescriptions lay down stringent structural
reforms and austerity (particularly dampening demand), a smaller loan from the
IMF retains the hope that the government will not have to accept
conditionalities that would place a heavier burden on the common man. The
question of what Pakistan had committed in return for the Saudi package was not
answered in the PM’s address, except perhaps a reference to our playing a mediatory
role in the Yemen conflict. Our parliament had passed a resolution during the
previous government’s tenure against sending troops to Yemen to help the
Saudi-led alliance against the Houthis. This was the gelled wisdom of our
legislators, who saw the Yemen quagmire as a dangerous playground likely to
suck Pakistan into a sectarian nightmare. Mediation may sound like a good idea,
but given the hard positions on both sides of the conflict, this sounds more
like the triumph of hope over reality. The unanswered question of the terms and
conditions agreed to by the PM to garner the package continues to agitate the
PML-N, PPP and ANP, who have all demanded the details be revealed, preferably
to parliament. Former senate chairman Raza Rabbani also suggested that if some
details were sensitive, an in-camera session could be held. The government’s
response is awaited. However, given the PM’s diatribe during his address
against the previous two governments of the PPP and PML-N, whom Imran Khan once
again held responsible for plunging the country into a serious financial crisis
by taking foreign loans recklessly and allegedly siphoning off huge funds
through corruption, it seems highly unlikely that the government’s response to
the opposition’s calls for transparency will be heard. The opposition also
resented Imran Khan’s well-worn narrative about putting all corrupt leaders in
jail in an unrelenting drive (No NRO, the PM reiterated).
The impact of
the good news on the market was positive, with both the stock market and the
rupee rising. Certainly if more friendly countries bail out Pakistan and the
rest is taken care of by the IMF, the fiscal space opening up will restore the
government’s finances to safety. However, there is good reason for asking the
government to help lower the unrealistic expectations from this government that
were the result of its rhetoric while in opposition. For example, the schemes
to build five million houses and create 10 million jobs should be revisited
after the real fiscal space emerges. Even if incoming finances provide the
cushion the government is aiming at, these two projects alone require more billions
than are at hand. On these issues, the government’s interests may be better
served by trimming such targets to something approaching realism, based on the
level of financing available. Container-top rhetoric cannot serve as policy
once the PTI has assumed the reins of power and is charged with actual
management of the economy and the country.
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