Off to the IMF

What news will Finance Minister Asad Umar bring back from Washington? Having successfully created a narrative that Pakistan is in desperate times, Umar will only come under severe criticism for returning without a concrete agreement with the IMF. It would appear that the PTI’s original promise to never pick up the begging bowl has long been forgotten – perhaps even forgiven – by the Pakistani public. But when sitting in the opposition, a political party makes such irresponsible claims, one must wonder whether the claims it makes when in power are similar. Before leaving for the US, Asad Umar took to another press conference, where he claimed that the economy had been moved from the ICU to the recovery unit. If we continue this strange use of medical terminology, then Umar is wrong. The PTI’s first nine months in power are more akin to an invasive diagnostic procedure; the real operation will start once the IMF deal is inked. And it should be clear that Umar has been honest enough to admit such elsewhere.The two most crucial issues for the public – and which will cause much misery for the next year or so – are that the growth rate will not recover and inflation will not fall. Things might get a bit better – but only after getting much worse; for now, the only guarantee for the times ahead is that things are going to get worse. Improvement is a promise that one would hope that the current government has the economic sense of being able to manage. For now, Pakistan’s economic managers would do well to display more humility in the face of criticism.The finance minister has identified three chronic deficits: fiscal, current account and savings and investment gap. Out of these, only the current account deficit has shown signs of improvement under the PTI, but not because of an increase in exports. High inflation never translates into high savings, and especially does not translate into higher investment. Slowing the economy is also rarely a great strategy for increasing the tax base, which means that problems lie ahead in terms of reducing the fiscal deficit. The release of the medium-term economic strategy is a good step, but one must wonder what will become of this with the economy under the stranglehold of the IMF. The finance minister knows that times will be much tougher ahead. It would be better if this is openly admitted, rather than claims to the contrary. There are many who fear that the government does not know what it is doing – and the questions become louder when the government makes tall claims, instead of sticking to the facts. The reality is that ordinary Pakistanis are more anxious about the upcoming IMF programme than they were about previous ones. It is the responsibility of the government to ease those nerves, rather than making the situation feel more precarious than it needs to be.

from The News International - Editorial http://bit.ly/2VFkdgp