By Muzammil Aslam
February 11, 2019 (MLN): A piece of news broke over weekend that Prime Minister Imran Khan will meet Christine Lagarde at the sideline of Dubai Summit, and some corners of media went ahead and linked the meeting with 14th IMF program conclusion. I reserved myself from commenting on this development with haste, and was trying to figure out what led to this meeting schedule.
Apparently, there was no need for the Prime Minister to meet Managing Director of IMF to request for program. But surely, there is a big divide in the country when it comes to embracing new IMF program. Opposition has also taken this opportunity to remind Khan of his former views on IMF.
Imran khan in past has _“linked IMF program with his suicide”. _
Khan kitchen cabinet and Economic Advisory Council have so far failed to build consensus over new IMF program mainly on the back of IMF debt trap and its ineffectiveness on Pakistan macros in the past.
Meanwhile, Asad Umar keeps on insisting IMF to tone down its conditionalities and presented homemade plan to IMF. On the other hand IMF staff is pushing their own front loaded economic reform program. The matter has lambasted by key rating agencies and forced them to temporarily down grade the long-term sovereign rating of the country.
Although PM Khan is hopeful of revival of macros with or without IMF, he surely wants to keep track of firsthand information rather than relying on information from his most trusted Finance Minister.
In that process, he has been meeting personnel who represented IMF in the past, economists, opinion makers etc. Some advised him to opt for IMF program without further delay and very few in minority advised him to pull things off through non-IMF means.
Given the divided opinions he gathered, his purpose to meet Lagarde seems to be to convince her about his seriousness towards revival of macro resilience through tough reforms. But equally PM Khan wants to spread out reforms over period without compromising the growth prospect. The above can be further revalidated from Khan’s tweet post meeting:
“In my meeting today with IMF Managing Director Christine Lagarde there was a convergence of our views on the need to carry out deep structural reforms to put the country on the path of sustainable development in which the most vulnerable segments of society are protected”
The press releases of both IMF & GoP are clearly pointing 14th program is bound to happen anytime now.
Simultaneously, Prime Minister has delivered his key note speech at Summit and clearly mentioned his intentions of tough painful reforms, meaning he is broadly in agreement with IMF suggested reforms.
Encouragingly, these weekend events will bring far more clarity to the set of investors who are looking for final verdict on whether Pakistan government will go for IMF or not?
Markets from now will start probing questions, regarding 1) the timing of IMF program, 2) Exchange & Interest rate outlook, and 3) structural reforms to stop fiscal bleeding.
In summary, the markets should receive this news positively.