IMF agreement without political stability!



When in opposition, political parties claim loud and clear that they may have innovative mystical solutions to Pakistan’s chronic economic problems. But as they sit on the Treasury benches, they all end up bowing to the IMF to bail them out of their years of economic and financial mismanagement and gross incompetence. However, there is a limit to everything and it seems that we have finally crossed that of the IMF.

It seems clear that there is already donor fatigue at play as this time around no one wants to hand over billions of dollars without strong assurance and they are all looking to each other and finally to the IMF for a signal of confirmation. But seeing the coalition government lose the Punjab throne and crumble at the center must have cast doubts in their minds on the incumbent government’s ability to continue rolling out tougher measures as before.

On the other hand, despite the burning of all the political capital, the incumbent government sees little or no light at the end of the tunnel. Lately the news feed regarding the discount sale of listed and unlisted government assets through the Intergovernmental Commercial Transactions Order 2022 has created a buzz with no official version but dozens of unofficial versions citing the Q-Block’s desperation to avoid a default as the five-year Credit Default Swap (CDS) for the country soared to 34% from an average of 6%.

Additionally, many eyebrows are raised when it comes to circumventing key regulatory requirements needed to ensure transparency and competitiveness when trading. From Pakistan’s point of view, the entities up for sale are strategic in nature and cause no concern for the country. In fact, they are for-profit companies, providing a steady source of dividends to the government, but the ones we should have long since gotten rid of are the kind of sinkholes no investor will touch even with a 10ft pole.

To sell holdings of listed companies such as OGDC, PPL, PSO, etc., the timing could not have been worse as valuations in the stock market are incredibly low. In fact, now is the time to buy more and not sell because there is a lot of blood in the street. Keeping these losing companies that are bleeding the treasury heavily for political reasons and selling the winners at a deep discount is like throwing away a kitchen sink just to get an IMF deal.

Despite all the misfortune and sadness, it seems that the world powers are determined not to have another debacle like Sri Lanka, as it could trigger a domino effect in emerging markets where most countries are facing enormous pressure. on the external accounts due to rising energy costs. However, it looks like the IMF wants to keep Pakistan on edge and squeeze as hard as they can to sign off on the toughest program ever put in place in the history of Pakistan or the IMF.

Explaining the recent rout in the stock market which shaved 6,000 points and the sharp drop in the Pakistani rupee which lost more than 70 rupees against the dollar since April, AKD Securities CEO Farid Alam opined that ‘In the midst of the political chaos, the longer window for the disbursement of the IMF loan tranche is creating a great deal of uncertainty and speculation in equity and currency markets. In addition, Alam again underlined the central role of the central bank governor, a position that has remained vacant since May 3, when Reza Baqir left office, to manage major day-to-day political affairs.

With the fate of the weak coalition government at stake and the growing demand for general elections even within PML-N wards, the burden of carrying out reforms is becoming unbearable and the political cost is too high for anyone. which political party. It appears that investor confidence has eroded to a historic low and cannot be restored with the mere promise of an IMF deal, as continued political instability and government indecision on key political issues will mask any hope of recovery.


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