It is true that things are becoming more perplexing and mysterious by the day. The market is becoming more anxious as the State Bank of Pakistan’s (SBP) foreign exchange reserves fall below $7 billion.
Every sane voice is advising the government that at this juncture, returning to the right path in relation to the International Monetary Fund (IMF) program is extremely critical, else default will become inevitable. However, the government and opposition are busy in politicking without realizing how serious the situation has become. Amid continuing speculation that Pakistan is on the verge of a debt default, instead of bringing some clarity, Prime Minister Shehbaz Sharif this week repeated the same mantra of “Pakistan will not default” without telling us what exactly the PML-N led coalition has planned to avert the looming catastrophe.
The PM said that due to the previous PTI administration’s failure to uphold its obligations, the multilateral lender no longer trusted Pakistan and compelled his administration to accept stringent loan conditions. The PM also blamed PTI for pushing the default narrative, guaranteeing that the country will be fine. But PM Sharif’s reassurances are certainly not enough. There are reasons why speculation has persisted. The country’s foreign exchange reserves dropped to a four-year low of $6.7bn as inflows dried up on account of Islamabad-IMF tensions. And it isn’t just the former premier Imran Khan and his PTI that are pointing out the deteriorating economic conditions, especially falling reserves. PML-N’s own former finance minister, Miftah Ismail, has been issuing similar warnings of late.
Granted previous governments have blamed their predecessors for the bad economy they inherited, however, taking the current perilous situation into account, PML-N needs to stop the cheap point-scoring and do what is right even at the cost of its political capital because nobody forced them into this position. It was the PDM parties who willingly toppled the PTI government to get power.
The situation is becoming more tense and more divisive and in need of genuine mediation. The PML-N led coalition government has to ditch populism, inconsistent economic policies, and favoring politically powerful lobbies. Economists and market pundits are clear that there is no way out without the IMF. Amid the mounting challenges of massive devaluation of the rupee, higher fuel and power prices, rising inflation, and shrinking foreign currency reserves, it is time for political factors to quit influencing economic policies. Moreover, the government must engage PTI, the biggest political force in the country, to end political instability in the larger interest of the country’s economy.
