Growth amidst consolidation.

Byline: Khaleeq Kiani

Policy-level discussions betAween the visiting staff mission of the International Monetary Fund (IMF) and Pakistan's economic managers on the first quarterly review of the 39-month loan programme are yet to formally begin.

The two sides have, however, already floated some fresh ideas to move forward on the $6 billion Extended Fund Facility (EFF) while minimising the collateral damage of the ambitious economic policy stance that is causing a contraction across the national economy. The review will be over by Nov 7.

With a reduction in the current account deficit mostly through imports, the domestic industry has slowed down and agricultural indicators - cotton and sugar cane production - are not promising. The consumption of petroleum products is declining after many years, apparently another key sign of slower economic activities. Savings in the import bill may have caused more harm than benefit.

Inflation is already taking a toll on the middle class. A high policy rate and taxation measures have hurt private businesses. The IMF itself is projecting core inflation of 12.4 per cent, general inflation of 13pc and a fiscal deficit of 7.4pc for the current fiscal year.

It has also estimated higher debt levels despite better revenues in 2019-20. There are handicaps within the policy direction. The monstrous circular debt in the energy sector hampers financing required to improve cash flows. Yet there is a firm cap on sovereign guarantees that the government can issue to launch funding papers - a chicken-and-egg dilemma.

The IMF is encouraging the government to make full use of development budgets across all layers of the federation as stimulus to economic growth

The authorities are now feeling the heat of their agreement with the fund to link purely economic policy matters with geo-political complexities in their rush to secure a bailout only a few months ago.

Interestingly, it is now the IMF encouraging the government to make full use of development budgets across all layers of the federation as stimulus to economic growth and achieve development goals. In fact, the government has already expedited disbursements for the current year's development programme.

In the first four months of 2019-20, Rs257bn has been authorised for release at the federal level for the Public Sector Development Programme (PSDP). This accounts for 37pc of the annual allocation of Rs701bn. This is significant when compared with less than 16pc a year...

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