Pakistan's economic state remains nervy.

• Author: Kazmi, Shabbir

Byline: SHABBIR KAZMI

Despite Pakistan fulfilling many of the preconditions, the release of the IMF tranche remains elusive. Until greater visibility returns on politics and the economy, it is difficult to build conviction around Pakistan's investment case.

February CPI was reported above 30%, a 50-year high, while the SPI suggests even faster inflation, north of 45%. Analysts expect CPI prints to peak in the 35-40% range in the next few months, and for the SBP to further increase the Policy Rate by 200bps on April 04 meeting.

On a more positive note, the current account deficit has slowed to a trickle, US$74 million in February and the foreign exchange reserves held by the State Bank of Pakistan rising above US$4 billion on receipt of fresh inflows from Chinese banks.

However, the real economy is under significant stress, especially going by the sporadic plant shutdowns across sectors such as autos and chemicals.

Early on in March, Pakistan introduced a PKR3.8/unit surcharge on electricity tariffs and reduced energy subsidies for zero-rated sectors. This seemed to move Pakistan closer to resuming the IMF program, but fresh bilateral flows have yet to materialize, especially from GCC countries, and the resultant funding gap is preventing the successful completion of the IMF's 9th review.

It is increasingly unclear whether the program will be able to resume at all, with Pakistan beginning to look in desperation toward US intervention and the earlier flood-related pledges in Geneva.

Although assistance from China has materialized via fresh disbursements from ICBC, and the rollover of US$2 billion in SAFE deposits with the SBP appears likely, Pakistan has to wait for funds from GCC countries.

This could be reflective of a combination of changing geopolitical priorities and greater alignment with multi-laterals such as the IMF to push for economic discipline and reform.

Donor fatigue is not necessarily bad over the longer term, as it may finally force Pakistan to introspect and get its house in order. That said, even if this comes to pass, the initial teething issues will likely be painful.

The Election Commission has postponed the Punjab and Khyber Pakhtunkhwa provincial elections from April to October, after the finance ministry and army expressed an inability to provide funds and security, respectively. This led the Supreme Court to take notice, and in response, the government has moved a bill to curb the Chief Justice's suo moto powers.

It...