After nine grueling months of back and forth with the International Monetary Fund (IMF), Pakistan has reached a staff-level agreement worth $3 billion with the global lender. Special credit must be given to PM Shehbaz Sharif whose direct intervention opened up a line of communication through which the deal was finalised, and now stands to offer much-needed respite to the country. While we breathe a sigh of relief, it is essential to come to terms with a few facts; there are still conditions which have to be met to keep the deal alive, a long-term economic crisis has not been averted and the need for reform is urgent now more than ever.
Pakistan spent the last nine months teetering on the brink of default. Depleting reserves, a balance of payments crisis, debt default, record high inflation and stagnant economic growth added to the woes of the public, and state alike. On top of all this, the help offered by the IMF was sabotaged by an inconsistent view of whether the country needed the IMF deal altogether. Despite Finance Minister Ishaq Dar’s obstinacy, we have landed back at a point where fiscal reforms must be tailored to the demands of the agreement. All that our resistance did was waste time, and add to the grievances of the people.
With the new deal secured, we have successfully stopped economic decline—at least for the short-term—and must now refocus our attention on driving growth. The finalisation of the deal will help unlock external funding from countries like Saudi Arabia, China and Qatar and will help calibrate our balance of payments crisis. Furthermore, it will provide us with enough leeway to hold elections in a stable environment and design a policy framework that will cater to the future of the country. Thus, the onus lies on the government, no matter which it is, to enact and implement the fundamental reforms that are needed to rescue the country from economic turmoil. This means embodying greater fiscal discipline, reforming the energy sector, improving state-owned enterprises, enhancing the public investment management framework, focusing on climate change resilience and uplifting the overall business climate.
It would be a shame if, once again, we fall back into the habit of backtracking and failing to uphold the promises agreed upon. We must not absorb ourselves in the immediate relief this deal will provide, but instead use this as a stepping stone for designing a more prosperous future.