IMF: critical choices.

Byline: Rashid Amjad

AFTER hitting rock-bottom, the economy is finally beginning to show some signs of being on the cusp of an upturn. The recent review by the IMF team points in this direction - inflationary pressures are easing and there is a gradual rekindling of economic growth. The real challenge now is to nourish the emerging green shoots and concentrate policy efforts on building growth. The alternative, sadly, would mean a painfully slow recovery after walking on broken glass to restore macroeconomic stability. This the government can ill afford.

To reignite sustainable growth, however, it is not the government that has to be convinced that a change is needed in the sequencing of the current IMF programme but the Fund itself. This may turn out to be a Herculean task since the IMF is known for its stubbornness and its 'one shoe fits all' neo-liberal economic dogma.

The basic aim of the current stabilisation package under IMF tutelage is basically twofold. The first aim is higher revenues and the second is increasing exports and reducing imports to overcome the recurring fiscal and current account deficits (and eventually building our real not borrowed foreign exchange reserves) which have been responsible over the past three decades for bringing the economy to a grinding halt and having to turn to the IMF to bail us out yet again.

Unfortunately, in designing this IMF programme what was not sufficiently realised by the government and the IMF was that in the short run, there may be a trade-off between the two goals of maximising revenues and maximising exports at the same time. Just eight months into the programme, this trade-off is apparent; meeting the ambitious revenue targets increasingly entails reneging on the incentives promised to exporters.

The government's efforts should be concentrated on easing the constraints faced by exporters.

This has taken the form of long delays in duty drawback refunds that reached Rs300 billion in December 2019 and retraction of cheaper energy and much-needed reduction in tariffs for cheaper imported inputs to make exports, and indeed the economy, internationally competitive - a major goal of the current IMF programme.

While the Pakistan government has now realised the limits to which the people can bear backbreaking inflation, the loss of jobs and the resulting rise in poverty, the IMF, unfortunately, is still slow to grasp the stark reality. All benchmarks set by the IMF to be achieved by December...