The recent reports on the talks between Pakistan and International Monetary Fund (IMF) for a bailout package suggest that there is a stalemate on the terms and conditions that IMF wants Pakistan to adopt. If words of one of the officials are believed, then Pakistan is left with the only option of pleading before friendly countries to assist it to get out of the financial crisis.
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It is true that certain conditions that Pakistan is supposed to take under IMF’s bailout package will have negative impacts on a lot of people’s lives. For instance, the state cannot afford to increase the power tariffs further nor can it burden its population with excessive taxes when per capita income is below Rs. 200,000. Also, if the IMF package becomes inevitable, then the government will also revise the share of provinces; the move will cause friction between the state and its federating units.
The government cannot meet the Fund’s demand for increasing the interest rates, as doing so will slow down the economic growth of the country. Neither can it allow a complete free float of the exchange rate for determining the value of rupee for it will result in inflation. Given the already high rate of inflation, the government cannot accept IMF’s requirement.
Nevertheless, one area where the government can meet the IMF’s demands of cuts is reducing its current expenditure. Reduction in current expenditure, however, means that the government will reduce expenditure on the military as well. The question that, then, surfaces is if the military will allow the government to cut its budget?
Pakistan is feeling a little relaxed at the moment as the United Arab Emirates has already pledged to lend Pakistan $ 3 billion and it is likely that China will follow suit. However, considering the current account deficit that is more than $1 billion per month, it is also true that the crisis can only be averted momentarily. Eventually, Pakistan will once again knock the door of the Fund.