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‘Good News’ From IMF? | Editorial

Perhaps it would have been a little more reassuring if the news about the “good news” about the IMF program restarting sometime “soon” had come from somebody from the finance ministry instead of the head of the State Bank of Pakistan (SBP). Dr Reza Baqir is no doubt a very fine fit for his job, and under him the state bank has been very impressively proactive especially during the pandemic, but he should know better than sharing his personal opinion about such matters when there is a dedicated government machinery to relay all such information. Now he’s got some people thinking, for no reason at all, that since he is the IMF’s man in Pakistan it could be that he is sharing information that the government might not be too comfortable with at the moment.

Besides, if the finance minister had made the announcement at a press conference, he could also have answered important questions about the fate and state of the power tariffs that the Fund wanted hiked to resume the program but the prime minister was reluctant so far. Now, instead of calming markets like the SBP governor wanted, he might well have unsettled them more by leaving very important questions unanswered for the moment.

It seems that recent hints in the press about the government finally caving in and accepting all the IMF’s demands were true after all. And while it is not difficult to understand the government’s position, especially since it now desperately needs the fiscal cushion that the program was designed to provide, there is still the danger of a certain amount of uncertainty gripping not just households but also the production sector. On the other hand, there’s also the fact that there’s only so much any sector would be able to achieve if the program is stopped and the reserves are left at near-empty levels. This has no doubt been one of the harder decisions for the government to take. The prime minister resisted the pressure, even if that meant putting the program on hold for an indefinite period, but now he is running out of options. That is both good and bad news for the market, since the economy is now increasingly coming under the grip of the second wave of Covid-19 and higher power cost and taxes will hurt it that much more.

Source: https://dailytimes.com.pk/712232/good-news-from-imf/

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