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IMF

CHALLENGES INTO OPPORTUNITIES

Poised to become the Prime Minister (PM). Imran Khan, Chairman of Pakistan Tehreek-e-Insaf (PTI) will lead a new Coalition govt. Among the acute challenges will be severe distress in the economy. Foreign exchange reserves have depleted due to widening of current account deficit and repayment of previous loans. The International Monetary Fund (IMF) may be approached for a US$10 to 15 billion bailout package to stabilise the external sector. Rather difficult given that the US has a say in IMF affairs and US-Pakistan relations are at their lowest ebb. Out of the blue came a warning shot, US Secretary of State Mike Pompeo warning Pakistan, “There’s no rationale for IMF tax dollars, and associated with that American dollars that are part of the IMF funding, for those to go to bail out Chinese bondholders or China itself”. While the coupling of one with the other is mystifying, for the foreseeable future the IMF option therefore appears closed. With the talk of a bailout by China not confirmed, the PTI govt needs engage the US govt with pragmatism, apprising them of the new dynamics emerging in the region and the need for both the countries to have a more constructive relationship.

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OPPORTUNITIES FOR THE GOVT

The balance of payment crisis has been aggravated by major currency devaluations taking place over the past few months, the Rupee plunging 15% since December last. Surprisingly the currency has appreciated by 4% .e. Rs 7.00 since Imran Khan’s elections on July 25. The State Bank having had to raise interest rates, the current-account gap widened by 43% in the last fiscal year with foreign-exchange reserves dropping alarmingly to $ 9.1 billion. While a China- sponsored “bailout” is rumoured, the newly elected govt might approach the International Monetary Fund (IMF). These loans come typically with strings attached i.e. curbing fiscal deficits, tighter monetary policy, etc one can expect even tougher conditions given that many structural reforms promised to the IMF were either delayed or not done by the previous govt. The US being front and center in any IMF initiative, one can also expect another boat of “do more”.

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Theory and Real Life

Dear Meekal, Your advantage of theoretical knowledge over someone without any false pretense of being an economist gave you the opportunity of subjecting me to condescending ridicule, you seem to have taken it with some pleasure in your article of July 3, 2012 in reply to mine, “Running out of time and money”. Given resumption […]

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Creeping Economic Anarchy

In order of priority the three major sectors of our economy are, viz (1) agriculture (2) industry and (3) services. Our planners set very ambitious targets for Financial Year 2000-01, most of which cannot (and will not) be met. Because of acute shortage of water (and other reasons including WAPDA’s shift to metered electricity in place of a flat fee), farmers were forced to reduce acreage under cultivation. The output of sugarcane and rice declined by as much as 19.1% and 11.4% respectively. Cotton registered a slight increase of area under cultivation, the overall production remained the same. Punjab harvested more wheat, it was offset by decreases in Sindh due to lack of irrigated water, even if grain production manages to reach 700,000 tons if the rains do come, it will be well short of the projected 772,000 tons. Given that cotton, rice, sugarcane, grain and wheat account for 94% of the agriculture sector, there will be an overall decline in all the levels forecasted. According to the Islamabad-based dream merchants’ optimistic predictions the people will not starve, shortages will be made up from buffer stocks but even they concede that the overall economic outlook for the year 2001-02 is exceedingly bleak. Given that acute water shortage is imminent, we are well on our way to a creeping economic anarchy.

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