August 12, 2023 (MLN): After prolonged dilly dally from Pakistani authorities to surrender to the IMF’s demands, when push came to shove around the end of June 2023, the premier Shahbaz Sharif hurried to meet IMF chief Kristalina Georgieva in Paris. The deal-or-default endgame haunted the markets and investors, who then celebrated the nine months of breathing space provided by the fund in the form of a Stand-by Agreement (SBA) at the eleventh hour.
Nonetheless, the economy is not out of the woods as the threat of default still persists.
The 16 months tenure of ‘all excluding one’ political parties came to an end on August 09, 2023, with the responsibility of the country’s decision-making to be rested in the hands of a caretaker setup.
Though section 230 of the Elections Act 2017 prohibits a caretaker government from taking policy decisions, the recent amendment paves the way for caretakers to ensure the protection of the country’s economic interests by taking necessary actions in dealing with international institutions and foreign governments for the completion of ongoing (not new) agreements or contracts.
There are also rumors of a prolonged caretaker setup amid the delay in the completion of the census. In such a case, the responsibility of complying with the SBA conditions remains in the hands of the ‘unelected’.
The first quarterly review of the IMF is to be conducted in November 2023. Will the review be conducted by a freshly elected government or by the prolonged caretaker setup remains uncertain.
Although one thing is for sure, the prerequisites for the first review will have to be completed by the caretakers. The second review will also include those months in which the caretakers were at the helm of affairs even if they do not breach the constitutional limit of three months.
Will the caretakers with very limited powers and no public mandate be in a position to take decisions on which the fate of the country’s economy relies? The answer may not be straightforward.
The IMF program requires stringent measures which can only be taken by a strong government with public backing and strong will.
Strong public backing with a simple majority ensures they don’t have to worry about their government stumbling and can take tough measures in the initial years to save the country from default while providing relief towards their remaining tenure to appease their voter base.
Moreover, both the PTI government and the ‘others’ were not able to complete the Extended Fund Facility (EFF) program and the country came on the verge of default. In such a case expecting the part-timers to do some magic would be a tough bet.
There exists a possibility where that part-timers may not be able to successfully complete the SBA program. In such a case the country would be towards a dead end, and running towards the elections means the upcoming government would have to fasten their seatbelts and rush into another full-fledged IMF program with negligible bargaining power, thus a costly compromise.
On the contrary, providing part-timers extra time and powers to negotiate with IMF may be beyond what the constitution permits. Moreover, the completion of the IMF program ratified by part-timers would be dubious from the start as whenever the elections would be held, the upcoming government would probably abandon the program to enter into a new one.
IMF seems open to working with a prolonged caretaker setup to ensure the successful completion of the ongoing $3 billion program. However, for Pakistan taking prudent steps and avoiding any adventure should be the prime focus.
Any mishandling in the nine months' breathing space would be inimical and may pave the way for an imminent default of the South Asian nation.
Copyright Mettis Link News
Posted on: 2023-08-12T09:16:03+05:00
