Major multinational companies with operations across a variety of sectors in Pakistan have lost faith in the country’s economy. In the previous six months, the Business Confidence Score (BCS) as a whole decreased by 21 percentage points to a minus 4 percent. In its ‘Business Confidence Index Survey Wave 22’ conducted during September-November 2022, the Overseas Investors Chamber of Commerce and Industry (OICCI) said that the top three reasons for decline in business confidence were political instability, rupee devaluation and high fuel prices.
Dollars have dried up in the interbank and open markets. Without the IMF, there is no recourse that may allow the country to stay afloat. To remedy the situation, the SBP is putting restrictions on imports to save falling forex reserves, at the cost of a slowdown in the economy, shortages of goods, and job losses. SBP’s reserves as of now are $6.7 billion, which means the government will have to cut down imports further. Pakistan is without a doubt staring down the barrel of a ‘default gun’ but the finance minister, who lives in his own fantasy world, is issuing threats to the IMF.
Economic and financial emergencies are being discussed more frequently these days, as well as the various solutions that should be considered to slow the economy down. Many of the measures to bring the situation under control have been advocated for the last six months, but it appears that the government is turning a deaf ear to them. The government is in a bind.
Reaching out to the IMF could not be more urgent. However, the finance minister’s approach has shocked the financial markets. Today, returning to the IMF program is the first step the government should take. Nothing less will be effective even if Dar manages to secure three billion dollars of extra funds from friendly countries. That won’t be sufficient. As it is, we must practice austerity and tighten our belts. If not for these, no one will be doling out debt.
While Rome is burning, the so-called financial wizard Ishaq Dar has the audacity to play politics. He is bullying the IMF, as though he has a solid backup plan in the absence of the IMF. The PDM coalition especially PML-N is not comprehending the gravity of the situation. The country’s economic problems are much more complex and merely bringing down the current account deficit is not going to resolve it. The country needs restructuring of debt to have some breathing ground.
PML-N cares too much about its political capital. They still think Dar will be able to fix the economy within six months with some magic wand and they will be ready to go into elections. But every unbiased eye can see the country is on the precipice. With every passing week, the anxiety is growing. The political elite must wake up and start thinking beyond their political capitals. Financial emergency should be imposed to bring the IMF back. It is necessary to undertake fiscal austerity and limit spending. Nothing is easy politically, but the government doesn’t have any choice either as the default clock is ticking.
