Raza Khan

Pakistan should not compromise on the International Monetary Fund (IMF) programme despite inflation and economic crisis in the country, experts said. They said the current IMF programme brought back Pakistan from the brink of default. It gave Pakistan a breathing space to carry out fiscal adjustments in an orderly environment. “Although the people are affected a lot by inflation because of fiscal adjustments, it would have been more painful without the IMF programme,” Dr Khaqan Najeeb, a renowned economist and former adviser to the Ministry of Finance, told WealthPK. “Pakistan’s deal with the IMF not only saved the country from economic collapse, but also helped in getting finances from friendly countries which resulted in growth in exchange reserves,” Dr Khaqan said.

He said the IMF programme would not be an easy one to complete as people were already feeling the heat in the shape of inflation and other economic challenges. “Pakistan left 21 IMF programmes incomplete despite inflicting all the hardships to the people in the shape of austerity measures and rising the prices of electricity and fuel,” he pointed out. He said that the country could not afford to leave the current IMF programme incomplete because it would be disastrous for the economy. “We need to grasp the agreed course of actions under the IMF programme and should set up a project management unit and a professional team to carry out and monitor the implementation,” he suggested. Monetary targets, credit aggregates, fiscal balances and cash transfer and exchange reserves are the areas which need to be monitored on a weekly basis through expertise, Dr Khaqan said.

“Structural and tax reforms suggested by the IMF should be our priority,” he maintained, adding that market-based exchange rate should also be ensured instead of controlling the rupee price. Dr Khaqan suggested that Pakistan should focus on improving exports and remittances in a bid to minimise the current account deficit (CAD) during the current fiscal year. “If Pakistan’s CAD swells during FY24, it would be a difficult task to arrange the finances to bridge the deficit,” he warned. Dr Sajid Amin, Deputy Executive Director at Sustainable Development Policy Institute (SDPI), was of the view that restoring the trust of foreign investors and international lenders should be the primary focus for the government. “Completing the IMF programme by implementing its conditions is compulsory to come out of the current economic crisis,” Dr Sajid said.

He added that the government should act fast and needs to make necessary budgetary adjustment to collect more revenue as committed to the IMF. Dr Sajid acknowledged that people in the country were disturbed by inflation and economic pressure created by the adjustments made under the IMF programme. “Yes, all is not well here, but we have to fix our fiscal problems through reforms and restructuring,” he maintained.  To get out of the present economic crisis, Pakistan must work on a four-pronged strategy, which includes completing the IMF programme, market determined currency exchange rate, rollover or rescheduling of debt, and effective social protection, he suggested. He said the government should let the market forces determine the currency exchange rate instead of controlling it. “It must be understood that any economic policy distorting the exchange rate and fixing currency price is bound to fail. It will add further to economic instability,” he added.

Credit: INP-WealthPk