Economic Respite

One more good news on the economic spectrum of Pakistan is the successful return of the International Monetary Fund’s missions that stayed on for ten days. Coming from the mission head, Pakistan and IMF are closer to a staff-level agreement on the extended program of $7-$10 billion – something the country’s economic managers had eagerly awaited. Both parties will be in touch on the details of the agreement but there are some fears and speculations that exist around the IMF program.

Ahead of the new budget, there is widespread concern related to the tax burdens that people will have to face shortly. While the IMF wants Pakistan to initiate more taxes before it settles on a program, coming off the back of a period of crippling inflation, the common citizen will be looking at this reform with little enthusiasm. Without a doubt, these matters will generate a lot of debate in Parliament. Given that we are also very close to a new budget, it remains to be seen how much confidence the government can draw in the Parliament and subsequently from the public. If the budget becomes contested and people express dissatisfaction with the new tax regime, the IMF program will face complications and it will be difficult to settle terms and conditions.

After the statement by the mission head, the temporary high point in the stock market indicates market confidence, which in turn tells how important it is to pursue the agreement. Here the government will have to be very prepared and weigh in all its options. Internal discontent will be as hard to navigate at this crucial stage. A balance is required and even for that, Parliamentary debate should happen as soon as possible so that the House has ample time to review the details of the agreement the government is very keen to embrace.

No doubt the IMF program will bring stability but Pakistan’s long-term benefits must be kept in view and above all, the welfare of the people and policies that benefit them.

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