A blind eye to default or a political milestone in the making?

May 12, 2023 (MLN): The fresh and crisp statement by the Federal Minister for Finance and Revenue, Senator Muhammad Ishaq Dar, saying that Pakistan would not default on its financial obligations, even if the stalled loan program with the International Monetary Fund (IMF) remained unsettled.

“On IMF instructions we cannot take more harsh decisions,” he said while addressing Islamabad Security Dialogue on Thursday.

Senator Dar's speech came at a time when the country’s foreign exchange reserves are rapidly depleting, leaving the IMF bailout package as the only feasible option to ease the crisis.

His declaration that the government will not take more harsh decisions will further distance Pakistan from securing much-needed economic support.

The loan program has already been in limbo for a longer than expected period and his comment “We have agreed upon all the pre-conditions of IMF and we cannot take further ruling,” has potentially hammered the final nail into the coffin of the tense relationship with the IMF.

Possible attempt of political mileage:

If the statement is critically examined, it seems to be an attempt to gain political mileage, hinting to present people friendly budget with bulky subsidies to sway public sentiment in its favor.

Earlier, there were news flows that the upcoming budget will be the most painful budget for the citizens as the government will likely comply with every condition put forth by the fund.

However, the ongoing political mess could have forced the government to take the same steps (mistakes) just to secure a few votes.

Safe to say that Ishaq Dar’s comments have completely overlooked the gravity of the situation.

It is true that Pakistan will need additional finances and only $1.7bn from IMF cannot resolve every economic problem of the country.

But the complete absence of IMF from the picture will not get us anywhere as the friendly nations will only support us if they see the government complying with the fund’s condition.

To recall, on December 2, 2022, the finance minister was questioned during the Geo News show ‘Aaj Shahzeb Khanzada Kay Sath’, regarding the delayed arrival of the IMF team to which he said, “I don’t care if they come. I don’t have to plead before them. I have to look at Pakistan’s matters.”

“I have never taken dictation and never will from these institutions, I have to look after Pakistan’s interests,” he reiterated.

Such statements can only make a minister or authority star for quite a short period of time and also for a lesser number of unversed people.

In the longer run, after December’s statement, we are still awaiting the much-needed green light from the fund.

At present the SBP is left with only $4.38 billion as of May 5, 2023, indicating the urgency of funds.

At the same time, Moody’s Investor Service warned that Pakistan could default without an IMF bailout as its financing options beyond June are uncertain.

As the economic crisis lingers, it is important for the government to prioritize effective financial management as any misstep could aggravate the country's dire economic predicament.

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